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re:PDX is written by Ron Ares, broker and market analyst affiliated with M Realty LLC in Portland, Oregon.
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Portland Receives a Visit from Dr. Yun
As the Portland real estate market shows symptoms of the national housing flu, the REALTOR association’s top prognostic doctor paid a house call.
In a conference this morning, I had the opportunity today to hear the latest forecast from the National Association of Realtor’s chief economist, Dr. Lawrence Yun. Over the past few years, the public profile of the economist position in the NAR has become more prominent than the actual NAR president.
Yun was recently named by USA Today as one of its top 10 most accurate economists. But Yun has plenty of detractors, too. Yun and his predecessor, David Lereah, have been widely criticized for their sunny, exuberant forecasts over the past several years, and for not anticipating the severity of the housing slowdown affecting many metro markets. Yun has taken a more self-effacing approach in the past several months.
Dr. Yun’s roadtrip brought him to a Portland Metro Association of Realtor Regional Homeownership Opportunities Summit (more on that in a future post), where he presented his “After the Cleanup” speech.
A summary of Yun’s takes on the national and local real estate scene:
- Real estate is not just local, it’s neighborhood local. Huge variations exist not only between markets, but also between neighborhoods (price declines are concentrated in ‘subprime neighborhoods’).
- The foreclosure rate (2.0%) across all mortgage types is double the historic average primarily due to the poor performance of subprime loans.
- National home sales are at 10-year lows, primarily due to fewer homebuyer candidates (no subprime loans), expensive jumbo loan terms (vs. conforming loans) and the effects of FannieMae and FreddieMac agencies placing “declining market” premiums on loans in certain markets.
- Subprime effects have peaked, stable FHA financing is becoming more prominent, and speculators have already defaulted.
- Housing affordability is improving, especially in markets with rapid price declines.
- He expects a stronger housing market for Portland in the 2nd half of 2008.
- He expects a rise in both sales and prices in 2009 for Portland.
- By 2013, home prices in Portland could easily be up 30%
Yun and NAR are clearly beating the subprime drum. The REALTOR forum limited his time for open Q and A, so I didn’t get to ask about his views on the effects of the Alt-A and other non-conforming (but not subprime) loan products, that some readers of re:PDX feel is the next upcoming nuclear winter of the mortgage crisis. He was hustled off to an interview with KOIN News and then to the Oregonian, who I presume will do a write-up on his visit.
As expected, Yun is upbeat in general about the prospects of housing recovery, starting next year. He cites pending legislation for tax credits for homebuyers, rates on jumbo loans coming in line with conforming mortgages, improved affordability in areas with steep price declines, increased reliance on traditional FHA programs, and a resilient national economy as factors for his optimism (he does not believe we are in a recession). His forecast states that 99% of US housing markets will have higher values in 5 years than today.
Shorter term recovery will depend much, he says, on either persistent or dissipating consumer ‘anger’. Pretty tough when filling the tank is $75 a pop, but we’ll see.
More: Video from KOIN News and a copy (PowerPoint) of Dr. Yun’s presentation.
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22 Responses to “Portland Receives a Visit from Dr. Yun”
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Did he predict that my income will be up by 30% by 2013? Great! Oh, and that health insurance premiums will stop increasing at double digit rates. And that gas will back to $3.50/gallon? And that the dollar will regain some strength?
Does anyone really take this guy seriously?
Predictions are all very well – but what EVIDENCE makes Mr Yun think any of the above will happen other than “God I hope so” ?
Consider :
* Sales are off 35-40% YOY
* Raw Inventory is at an all time high
* Foreclosures are rising to all time highs with no indications of a slowdown
* Credit continues to tighten as the banks come under increasing financial pressure
* Inflation continues to stress the consumer at every turn
* Price drops are accelerating across the country leaving more people underwater every day
* Empty homes for sale at all time highs
I just don’t see an upside until some of the above factors show signs of reversing. Maybe someone in the biz can point to some factors that make Mr Yun believe a turnaround is coming in the traditionally slower second half of the year….
Or maybe his real title should be “Marketing Director” instead of “Lead Economist” as I’m not seeing any sensible analysis from him or his predecessor.
House prices can only rise as income levels rise. As soon as they disconnect we’ll just end up right back where we are now with people only being able to afford homes using ARMS and interest only mortgages. Since other costs have risen so much lately, gas, food, healthcare, etc the percentange of income available to use for a mortgage is going down not up. Portland like other markets experienced 2-3 years of above trend line growth, and it needs to get back to the trend line before prices can increase again. Just plot the case-schiller data in excel and the evidence is clear. $500K for a track home in Bethany is not going to fly anymore.
I just came back from the San Francisco Bay area. I will be transferring there for work. I was expecting to see home price reductions but instead was presented with homes selling for 15% to 35% higher than asking prices. I was in cities such as Berkeley, Oakland, San Jose, San Francisco, Los Gatos and a few coastal towns.
I saw no sign of a real estate downturn or price concession. For instance in a neighborhood of Berkeley near the freeway, a fixer with 3 bedrooms, just over 2000 sq. Ft. was asking for $800K and sold for nearly $820K. The real estate agent told me that prices have held up well with still bidding wars. The bank repo’s were also selling for ridiculous prices.
So, please tell me where is the real estate downtrend happening. Are we looking at to broad of data to explain the micro areas? From my recent visit, I would say Dr. Yun must be right, the market is based on the tiny markets and possibly by housing type and style. Because the home prices in the bay area seemed pretty high to me and with multiple offers.
The Bay area still has a strong job market. I am referring to Portland…where are our bidding wars? What neighborhood(s) is has very few DOM?
Yes, RE is local but no way can you compare the Bay Area with Portland even though both are on the West Coast!.
There was an article recently that noted close-in areas/desirable areas of NYC, Boston, SF, and San Diego have been reporting continuing appreciation albeit at much lower rates than previous years. So yes, suburbs like Happy Valley of Portland likely are bringing down the numbers which begs the question…did the suburbs also over inflate the numbers during the boom?
“For instance in a neighborhood of Berkeley near the freeway, a fixer with 3 bedrooms, just over 2000 sq. Ft. was asking for $800K and sold for nearly $820K.”
20K over is only 2.5% over asking. Where are you getting 15-35% over asking for homes that you saw? Do you realize how much that is when you are talking about $800K homes (120K-280K over asking?!?!)
Median home price in Los Gatos in 2005=$1,198,200!
The higher prices were for the homes that were in great condition and with views of the Bay. Sorry for any confusion.
Doug,
The upper middle class are notoriously reluctant to reduce prices. They tend to sit on homes and let holding costs and inflation erode equity. This kind of stupidity ensures that the current housing depression will last for years to come. I’ve doubled my money since 3-07 by betting against the housing market and its my fervent hope that people like you continue to buy!
LOL!
So 15-35% over asking for homes in great condition and with views! I am still in shock. So you are saying these homes that were listed for most likely $1.5-2 million still got 15-35% over asking?!
I wished I never made a comment. I had no idea that a person would be attacked in such a manner. I was just presented some sales figures from an agent I am working with and just trying to buy a home near my clients. Prices are shocking for me. All I do is develop math models for corporate clients. I would just like to post a comment and have a friendly exchange. Not for something to get personal. I will sadly leave this as an experience that leaves a sour taste.
The homes I am looking at are around 3000 – 4000 SqFt for my purchase. The price is not an issue, but it is shocking. I would like a deal like any other buyer. Most likely, I’ll buy at Half Moon Bay. I just prefer to be closer to the people I work with. I am not being forced to move since I work for myself, I like it here in Portland. We moved here to be near the grandparents for the children, but I feel to be more effective in testing my work, I should be closer to the problems I solve.
I am not sure how this happens, posting a comment on a blog and then being challenged along the way. But maybe that is what happens. It is sad to not be able to express an experience and leave it at that. I am not reporting something of consequence just a harmless personal experience, a life encounter that is small in matter. And how I became “sucked” into this exchange is “shame on me”. So accept my apologies for stirring your pot and causing you agitation and I wish this agent the best of luck in keeping this blog going.
Doug- having someone clarify your claims is not considered out of the ordinary for most people. You put up some wild numbers for them to be taken at face value, or as a “personal experience.”
Besides, aren’t blogs all about getting “sucked” into exchanges?
Thanks for the fun posting!
I knew this post would elicit some comments
– none particularly in support of Yun’s forecast, but since I was there, I thought I would report anyway.
@Doug – I’m disappointed that sharing a casual, anecdotal experience would cause that much scorn. It can be a tough crowd if your comments run against the grain of housing-crash enthusiasts.
For the rest – Yun is a controversial figure, no doubt. I thought it was interesting that his visit was so low profile. Very few REALTORS knew he was in town. (The Oregonian has yet to comment on his visit, perhaps in the Sunday edition.) Those that attended were looking for some encouragement, and he did not disappoint.
He only took a few questions (due to time constraints), and they were mostly softballs. I do not think he had a particularly strong grasp of the PDX market (he did not know that the raise in conforming loan limits had no effect in Portland, and he did not have a strong opinion regarding our UGB).
I really wanted to ask about the Alt-A question (for you Uncle Git) in context to the subprime thesis. (I even left the meeting to try to catch him in the foyer, but he was hustled off to the Oregonian offices.)
His slides are linked in my original post – please look at them if you’re looking for the basis for his forecast. There is no accompanying narrative, but perhaps you can draw conclusions. I certainly think some of his claims have merit, but not all.
My apologizes for sounding like I was attacking but honestly, I just wanted clarification as I was shocked that someone would offer 15-35% over an asking price of $1 million+! It is the Bay Area, I guess. My spouse contracted in the Bay Area for about a year. Santa Cruz area was a dream but the salaries for the San Jose-Los Gatos – Santa Cruz area still didn’t make sense with the given salaries. But then, I am just a nurse, you would most likely need two hi-tech incomes or be one of the big dogs.
I still don’t believe comparing the Bay Area to Portland is apples to apples comparison, IMHO.
Anyone wanna tell me how Yun came up with the statement, “By 2013, home prices in Portland could easily be up 30%”? Anyone have any take on it?
Shheesh Ron, you have to admit that 15-35% over asking prices of a million$ should illicit some doubt or at least surprise. Is that happening in Lake Oswego?!?! Not according to Poperty Blotter. Isn’t MLS reporting that homes sold are going for on average 93% of asking price?!?! I am just a lowly blue collar worker totally disconnected from the high end lives of the rich and famous. Me and my $75K/year will just sit and watch the spectacle.
We are down, what 8% now, are the bubble deniers still in denial? MLS and C-S are reporting declines. Portland still special in that immune sort of way!?
Yes, some neighborhoods will get hit more than others but everyone will feel it a bit, the least being stagnant prices.
I have yet to hear an explanation for sustaining high prices without the liar loans…let’s see what our ever increasing foreclosure rate does over the coming 12months.
Personally, I am tired of being accused of ATTACKING people when they can’t back up their statements. For months folks on Turners blog were stating why Portland would continue to appreciate because of our “strong fundamentals” yet no one could define them. I would ask about the effects of the subprime and liar loan game on the market or the foreclosure rate that starting to jump months ago yet no one wanted to go there…they just kept spouting, “Portland has strong fundamentals”…
Portland is un-affordable for most, bottom line. Unless you want to stop contributing to your retirement. Stop the health insurance plan and avoid the doctor. Stop the vacations. Stop going out to eat. Not have children to avoid the expense of daycare….
I do predict significantly higher taxes in 30 years to bail out the folks who didn’t save for retirement and health care…that is what I will be bitter about. For now I just shudder…
Ron – are you going to come to Clint’s get together at the lucky lab ?
If you are I’ll try to make a effort to appear specifically to buy you a pint
It takes some minerals to host a RE blog in this day and age as a realtor – especially one that allows open discussion as you do..
I respect that.
Hope everyone is enjoying the good weather today.
“Not for something to get personal. ”
Methinks Doug doth protest too much.
http://www.dqnews.com/News/California/Bay-Area/RRBay080520.aspx
http://www.trulia.com/real_estate/Berkeley-California/
http://www.trulia.com/real_estate/Oakland-California/
Ron,
I’d like to see you at the blog meet up; I’ll buy you a few drinks too!
8pm on June 20th at the Lucky Lab on SE Hawthorne.
It would be great to have some industry people show up.
Uncle Git & Clint -
Short of family commitments or heaven forbid, business, I’ll be there.
Excellent – I’ll make an effort to show up then – although I’m on call that week – so if business prevents I hope you’ll excuse.
So is the plan to get the realtors all drunk and tape record them admitting that Portland is experiencing the burst of a housing bubble;O) hehehe
Hope to see you all there. I will be drinking root beer though since my childcare expenses will nearly double at this time next year……$1,600/month…more than my mortgage ever was!
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