From: Statesman Journal Posted on: Friday, September 28, 2012
Meghan Brown and her husband, Aaron, saw a wobbly economy, a soft real-estate market and a prime opportunity to buy their first home.
“When the economy is well, then prices go up, interest rates go up,” Meghan Brown said. “We decided to take advantage of the poor economy.”
The Browns, who work for the local school district, recently purchased a house in northeast Salem close to their $160,000 price target.
To sweeten the deal, the seller threw in some of the home’s furniture. The seller had listed the house twice before and was eager to bargain.
For home buyers such as the Browns, falling home prices during the past five or six years means more value for the money. Buyers might have picked a good time to jump into the market: local home prices appear to be on the verge of stabilizing.
For August, the average sale price for a home in the Mid-Willamette Valley was $193,158. That’s down by less than 1 percent compared with August 2011, according to multiple listing service data.
But the housing bubble’s collapse has resulted in a large attitude adjustment for buyers and sellers. People who bought houses at peak of the market effectively lost tens of thousand of dollars.
From dreams to means
“It’s a different world now. The people selling starter homes aren’t necessarily buying up,” said Bob Riggi, an agent with Real Estate Solutions of Oregon.
“People are starting to buy the house of their means, as opposed to the house of their dreams,” said Jim Lewis, executive officer of the Salem Association of Realtors.
Lewis’ industry also has taken a step down. The Salem Association of Realtors’ membership is about half of what it was at its peak.
Newly constructed houses in the Salem area have shrunk in size and cost. The typical new house is 300 square feet smaller and sells for $50,000 less than what was being built in 2006, according to the Home Builders Association of Marion and Polk Counties.
Jan Anderson and her husband, Jerry, both retirees, wanted to move closer to family in Salem. They sold their home in The Dalles and purchased a newly constructed home in South Salem for about $200,000.
“We’re buying at the bottom of the market. We’re assuming the price is going up eventually,” Jan Anderson said. The Andersons figure they lost money on the home they sold in The Dalles.
Rudy and Sonja Ordonez still are looking for a house in the Salem area. Encouraged by low interest rates, they hope to trade up to a $250,000 to $280,000 home.
Real estate agents say concerns about job security has kept many from taking the plunge.
“If people think they can get a job, they’re going to buy a house when money is this cheap,” said Byron Hendricks, the president of Prudential Real Estate Professionals in Salem.
Closed sales are running ahead of last year at this time for the local Prudential office. The dollar volume is about even with summer 2011, Hendricks said.
At the height of the housing boom, getting a home mortgage was easy for most consumers — too easy. Critics say the pendulum has swung from overly lax lending standards to overly restrictive standards.
“Lenders have only been willing to lend to the cream of the crop of potential buyers,” said Walter Molony, a spokesman for the National Association of Realtors. Homes sales would rise as much as 15 percent if banks returned to “safe but sensible” lending standards, he said.
Lois Mulrooney, a mortgage broker and owner of Resident Lending Group in Salem, doesn’t agree that banks are making it too difficult for first-time buyers. Programs still are available to help those who can’t afford a large down payment, she said.
Buyers scoop up foreclosed homes
Bank-owned foreclosed homes, aggressively priced to sell quickly, have rekindled real estate sales. Local real estate agents estimate that about 29 percent of the properties on the market in the Salem area are bank-owned foreclosed homes or short sales.
Ted Urton, vice president and county manager for Fidelity Title Insurance in Salem, said it’s unlikely that prices will rise significantly until the short sales and bank-owned properties begin to thin out.
Buyers, however, are starting to whittle down the inventory. Since spring, distressed properties have been selling at a brisk pace.
“We’re so busy it’s not funny,” Urton said.
Some real-estate industry observers suspect banks are holding back on releasing foreclosed homes to the market. They think prices could sink when these homes are offered for sale.
From the perspective of John Helmick, chief executive officer of Gorilla Capital, the assertion that a shadow inventory of bank-owned homes exists amounts to “a wonderful urban myth.”
Gorilla Capital is a Eugene-based company that’s one of the nation’s largest purchasers of homes sold at foreclosure auctions. Homes that slide into foreclosure are being put on the market in an expedient manner, Helmick said, and consumers are buying them.
Gladys Blum of the Gladys Blum Group real estate agency in Salem, said the typical seller sometimes has a difficult time competing with the prices on bank-owned properties. Homes are spending less time on the market before finding a buyer, but prices haven’t moved up, she said.
The long, slow climb
Dean Baker, an economist with the Center for Economic and Policy Research, an independent think-tank, doesn’t expect an improved housing market will lead the economy out of its current slump as it did in early 1980s and early 1990s.
In 2002, Baker was among the first economists to warn of the dangers posed by housing bubble.
“If people are expecting house prices are going to get back to 2006, that’s not going to happen,” Baker said. Homeowners coming out from underwater will be a “very gradual” process,” he said.
Between 2005 and 2006, the average sale price of a house in the Mid-Willamette Valley rose by 16 percent. Homes priced above $300,000 became common in Salem’s newer subdivisions. South Salem and West Salem became hotspots for development.
While the U.S. housing bubble began to deflate in 2006, prices in the Salem area continued to rise, at a slower rate, into 2007.
The average sales price locally reached $249,200, according to multiple listing service data.
Currently, the average sales price in the Mid-Willamette Valley is 22 percent below the market’s peak.
That’s fine with the Brown family, whose $160,000 home likely would have cost upwards of $35,000 more five years ago.
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