Many brokers are optimistic about stronger sales, though others are more cautious
By Ilene Aleshire; blue chip; Published: 12:00 a.m., Feb. 3
Lane County’s residential real estate market saw double digit increases in both prices and sales volume in 2013.
Some local real estate brokers say they don’t expect to see a repeat of the 12 percent rise in prices reported last year by the Regional Multiple Listing Service. But they do expect to see continued growth in the residential real estate market.
“We’ll see an extension of what we’ve seen in 2013,” said David Holland, owner of Barnhart Associates in Eugene. “Nothing simple, nothing easy, but transactions are going to happen. Buyers are going to buy, sellers are going to sell. I think we’ll continue further along the path started in 2013, returning to more normal sales activity. As for prices, I think we’ll see continued appreciation but it’s not going to be huge.”
“I’m cautiously optimistic,” he summarized. “More optimistic than cautious.”
Kim Heddinger, co-owner of Golden Realty in Eugene, had a similar assessment.
“I don’t think appreciation will be as high as what we saw last year,” she said, “But I think we will have a healthy year. We could be getting into a buyer’s market; (up to now) it has been tilting towards a seller’s market with the inventory being so low.”
Heddinger said interest rates, which recently were hovering around 4.4 percent for a 30-year fixed mortage, according to bankrate.com, may increase this year.
But, she added, “I don’t think we will see a major swing. It may be 5.5. percent by the end of the year.”
Holland and Heddinger said several factors will fuel continued growth in local home sales not just this year, but beyond.
These include formation of new households and the quality of life in Lane County.
“People choose to be here,” Holland said. “We’re still a net importer of people into the community.”
Heddinger said she is seeing in-migration to the state again, and not just from California, a significant supplier of homebuyers here before the recession.
“They are coming from all over the country,” she said, attracted by a desirable quality of life and prices that are more affordable than bigger cities such as Seattle, San Francisco and Portland.
As the area moves further away from the recession, there also will be more interest in real estate as an investment, Heddinger predicted.
Once potential homebuyers sitting on the fence start seeing appreciation in real estate again, she said, “They will be back. It’s just going to take some time.”
If Heddinger and Holland are cautiously optimistic, Matt Powell, co-owner of Windermere Real Estate/Lane County, is optimistic without the qualifier.
“If you would have asked me 45 days ago my thoughts on 2014,” he said, “I would have been less positive and optimistic. However, with recent inventory numbers and overall buyer activity, and the improving economy, I’m very excited about 2014 and anticipate another year similar to 2013.”
John Helmick, CEO of Eugene-based Gorilla Capital, on the other hand, is heavier on the caution and lighter on the optimism.
Helmick makes his living buying distressed properties, spending a significant amount of money to fix them up, and then selling them for a profit.
In an ideal world for Helmick, he would buy distressed properties and, while he was fixing them up, the market also would go up, boosting his profits. But he’s not seeing an ideal world, at least not in Oregon in 2014.
“Some people look up and see nothing but blue skies,” he said, “but maybe they are not looking at the horizon and seeing the gathering storm clouds.”
The primary storm cloud that is worrying him is the increase in foreclosures he thinks will hit Oregon — including Lane County — next year.
Helmick cites a recent report from California-based RealtyTrac that found foreclosure starts were up 38 percent in Oregon in November 2013 compared to November 2012 and scheduled foreclosure auctions were up a whopping 726 percent.
“A 726 percent increase is significant,” Helmick said. “The largest increase of the 50 states is significant, especially considering that most states are seeing a decrease. No one is talking about this.”
“We will be one of the few states that will have more foreclosure starts in 2014 than in 2013,” he predicted.
A change in state law that went into effect last summer, requiring lenders and homeowners to go through mediation before a home can be foreclosed on, has created a backlog in homes headed for eventual foreclosure, Helmick said.
“There were over 2,200 foreclosures in July and in August in the 20 counties we track,” he said. After the new rules went into effect, he said, “the 2,200 (monthly) foreclosure filings in the 20 counties we track dropped to 200. What’s wrong with this picture? (The drop) is not real. It’s this mediation process. Everyone thought it would take 60 days. Instead, it takes about six months.”
Helmick estimates there is a backlog of more than 20,000 homes still in the pre-foreclosure stage in Oregon. Once these homes make it through mediation, and receive their compliance certificate attesting to this, most of them will end up being foreclosed on, he said. “These are people who will not have paid their mortgage for several years,” he said.
This influx of distress sales will be felt in the market, he said. “It’s not going to kill the market, but it will depress prices.”
In addition to what he sees as a backlog of distressed properties that he thinks will be affecting the market for at least the next two years, Helmick is anticipating interest rates on mortgages will go up, probably to about 5 percent, which will also affect a market that has become used to record low mortgage interest.
Consumer optimism is a big factor in home sales, Helmick added, and there are a number of positive things going on right now in the economy, such as decreasing unemployment, that bolster confidence.
But, he added, “That consumer confidence will run into those two headwinds (in 2014). I would be very happy to see home prices continue to appreciate. But whether all the positive things will be able to overcome those two headwinds is really the question. I’m not highly optimistic.”