I’m also at a loss as to how the UGB is constraining supply at this point. How does the UGB influence prices in inner SE, for example? People who want to buy “close in” don’t care about the UGB because it’s too far away from their target area. I see plenty of land still available in and around Beaverton, for example. Take a drive out through Hillsboro, Cornelius, Forest Grove and then down to Newberg and back through Sherwood to Tualatin. Lots of new building in those areas and plenty of land still available. How is supply being constrained?

Leo’s point is important: finance is global and the current credit crunch doesn’t know anything about the state boundaries of Oregon.

Did you really think these prices were sustainable?

The burden of proof lies on the claim that one particular thing will behave differently from all others, not that each thing will behave like all others. I don’t need to prove that every hydrogen atom in the world behaves the same. By default, the simplest assumption is that they will all behave similarly unless you can prove otherwise (Occam’s Razor).

“RE UGB: Where UGB has held building in check, it’s held prices in check. Portland proper YoY in Feb was up .6%; absent the flood of condos it was up more than 1%.”

“In check?” Seems to me that the UGB is frequently used to justify inflated housing prices. How is severe price inflation “in check?” Besides, the UGB argument is logically flawed. You can logically argue that prices in areas with a UGB can be higher than prices in areas without UGB, but you cannot argue that prices in areas with a UGB can never be too high. When prices become too high, it is inevitable that they’ll fall, with or without UGB.

“It’s a constant theme of mine, so let me repeat this: Real estate isn’t just local, it’s hyper-local. “

Real estate may be hyper-local, but finance is global. Most real estate is bought with borrowed money. If you restrict your analysis to real estate bought with cash, I’ll agree with you.

Here are a few numbers for you:

Dow Jones Average

9/18/2007 13739.39

3/14/2008 11951.09

Where did the confidence go?

In October of 2007?!

Don’t worry, I don’t expect a response. I’m just a troll, you know.

They calculate median price for a given month – but the appreciation numbers we all hear about use the 12 MA method of calculation – thus leading to a smoothing of the curve and underestimating both runup and price drops and making the number significantly less responsive to the changes in market direction.

Assuming a drop occurs at the same pace as the runup did using the 12MA method a drop will be a year old by the time we see numbers go -ve. Using straight YOY comparisons of the median will report the change in market direction in 6 months.

This is the reason I believe why we are yet to see -ve numbers in the headlines for portland – won’t last for long though.

Surely the UGB would increase prices as it constrains supply ?

I think the reason Happy Valley is falling faster than elsewhere is that the builders are more ready to cut prices to move inventory.

Building is a cash flow hungry business – inventory sitting is a nightmare for them as they have to cover the carrying costs of the construction loans etc. So when they cant sell they drop prices until they do sell – private resellers have an emotional attachment to the home that a builder will never have – they tend to chase the market down “I’m not going to give it away” or “it’ll sell when the market comes back in the spring”

Builders *always* lead the charge down.

> lot of that is to do with the way Portland calculates the median price for any given month.

They use a 12 months moving average worth of prices and the previous year’s 12 months MA of prices

You’re mistaken. You’re confusing the way RMLS calculates appreciation, which involves the use of YoY median price, but in no way determines its calculus. Case/Shiller, of course, calculates all 20 MSAs exactly the same; no matter how you measure, Portland Metro is still YoY positive, in Feb a paltry 0.6%, but positive nonetheless.

Does that mean we’re in a healthy market? No. Homes for sale have been dropping price for over a year. The limitation of using only median price as a guide is that it measures the mix of homes sold. The downward pressure on prices via high inventory and low sales is going to have an effect.

Does that mean we’re going to follow in the footsteps of ‘California’, as was your original premise? Not a chance. You still haven’t shown correlation, and even inflation adjusted changes nothing since all markets changed proportionally. What’s happening here is dynamically different that what’s happened in San Diego; real estate is local.

RE UGB: Where UGB has held building in check, it’s held prices in check. Portland proper YoY in Feb was up .6%; absent the flood of condos it was up more than 1%.

But in Happy Valley, where building was essentially unchecked? Down 21%.

It’s a constant theme of mine, so let me repeat this: Real estate isn’t just local, it’s hyper-local. As I said initially, trying to predict what’s going to happen here based on what happened a year ago in ‘California’ is fallacy at best, and dangerously misleading.

Best.

I’m curious given the data I’ve provided what part of the economic analysis you actually disagree with ?

The UGB theory just doesn’t seem to hold water when the inventory numbers are at all time highs for Portland and sales are 30%+ down YOY…

Housing’s largely a classic supply/demand scenario – supply is growing and demand is diminishing now the capital appreciation is no longer making up for rents not covering the mortgage on investment properties and the lending landscape is returning to sanity and thus removing the ability of people to temporarily defy the reality of that kind of debt load through “creative finance”.