If you want an honest advice on buying a house in Eugene from somebody who does not have an inherent conflict of interest (i.e. is not a realtor), here is my advice: don't do it.

First, Eugene is not in the same place in the real estate collapse cycle as the rest of the country. Locally, residential real estate prices peaked in the 2nd-3rd quarter of 2007, or a year later than the national peak.

Second, Eugene housing prices peaked at a higher level than the median price nationally. This is important, because historically Eugene single-family home prices have been lower than the national price until around 2006. If we were to revert back to the trendline today, the prices would fall by over 20%.

Third, the prices in Eugene did not fall as much since the peak as nation-wide prices. Nation-wide, prices are off by 32% from their peak in 2006, while Eugene prices are off by only 15%. Since local real estate prices have grown by more than the national average during the bubble years, it stands to reason that they will fall at least as much as they have nationally if not more. So again, we talking a roughly 20% downward adjustment here.

Then, there is an issue of housing affordability. The Department of Housing and Urban Development considers housing affordable if the median price does not exceed the median household income by a factor of three. In Eugene, the ratio stands at about four right now (possibly more if you figure in falling incomes).

This basically means that the prices have to decline by about 25% in order for an average family to be able to afford a house in Eugene. I think one can make a compelling argument that there will be no sustainable recovery in housing until the average family with good credit can afford to buy a place to live with at least a 20% downpayment and a monthly mortgage, insurance and property tax payment that is comparable to a monthly rent for a similar house. Right now, it is much cheaper to rent than to own in Eugene. There are a lot of houses for rent out there, and many of them are owned by people who can’t sell them.

Finally, there is the macroeconomic picture. I think it is fair to say that Oregon in general and Eugene in particular have not fared well in this recession. In terms of the official unemployment rate, we are second only to Michigan that has been hit hard by the collapse of automobile manufacturing. The real unemployment rate in Eugene (called U6 in BLS parlance) is closer to 18%. I suspect that most of these 18% of Eugenians will not be buying houses any time soon, and in fact stand a risk of losing the houses they have now to foreclosure if the economy does not pick up.

The foreclosures are another big unknown here. In every housing clump on record, foreclosures had peaked before the prices bottomed out, and there is little reason to think that things will be different this time around. In the first half of 2009, foreclosures in Lane County doubled from the same period last year. Whether the government efforts at loan modification will have any impact here remains to be seen. Too many people are too far under water to be helped by loan modifications. Government studies show that the vast majority of people with loan modifications end up defaulting anyway.

Another macroeconomic trend is population. Historically, the population of Eugene grew by about 1% per year. Last year, the growth slowed to about 0.6%. It is reasonable to expect that if the local unemployment rate remains higher than the national average for an extended period of time, population growth locally will slow even further or turn negative. This will have an impact on the housing market by reducing the demand for houses and increasing the supply, thus putting further downward pressure on prices.

If you are new to Eugene, the best course of action is to rent for a couple of years, learn more about the community and the neighborhoods, get a better feel for different schools in the area (if you have kids).

Whatever you do, best of luck and welcome to Eugene! Grossly overpriced real estate market and high unemployment rate nonwithstanding, this is still a great place to live.

Hi Ryan,

You've received a lot of good advice, but piece of info missing so far is in regards to PMI. If you purchase a home outside the city limits using the USDA Rural Home Loan program, you can avoid PMI. This is a 100% financing program, but only properties outside the Eugene/Springfield city limits will be eligible. Many of these are still quite close-in. You can check eligibility online at the site linked below. Not all lenders work with this program, but it is a good one.

Sincerely,

Kim Crieger Goodwin
Crieger Goodwin Real Estate Sales
541-729-8007

Ryan,

If you are looking at 10% down, you will have the option to go either FHA or Conventional. Either way, you will be required to have PMI. In order to go conventional you will need a 720 FICO to obtain PMI. The loan will be cheaper b/c FHA requires upfront MIP (Mortgage Insurance Premium) and Conventional does not. MIP is 1.75% of the loan amount. It is added to the loan balance. However, you can put down as little as 3.5% if you do decide to go FHA.
Please feel free to contact me and I'd be more than happy to answer any questions you have as well as get you pre-approved. I am licensed in Oregon.

Dan Sidenberg
561-901-4907
DSidenberg@WCSLending.com

Ryan,

Well it looks as though you have received a lot of great information from area professionals! I too specialize in first time home buyers and offer a monthly seminar to first time buyers that goes through the entire purchase process from start to finish. I would like to personally invite you to attend our next seminar that will be held Saturday July 18th from 10:30-12:00 at Western Title and Escrow located at 497 Oakway Rd.

There you will have the opportunity to meet with local trusted and knowledgeable professionals that can answer your pressing questions to put you at ease. On site will be a mortgage broker, mortgage banker, CPA, escrow specialist and myself to cover each aspect of the purchase process. If you and your wife do not wish to wait for the seminar I would encourage you to contact me privately for my top three area lenders that would be able to offer the best products and prices for you.

There are really three avenues you can travel as far as lenders go. The first is a mortgage broker (they have the tools to outsource to different institutions the best product for you), mortgage banker (can only use the products the bank has available and often times can get you the best interest rate), and a credit union mortgage lending specialist (they have other options such as "in-house" lending available to them as well).

My reccommendation is to first obtain a CURRENT credit report from one of the three credit reporting agencies to bring with you as you meet and decide upon which lender to work with. The second would be to request a Good Faith Estimate (GFE) from each lender to allow you to compare "apples to apples" with their fees and APR's. You will find that each lender would like to pull your credit, but please remind them that you are well within your rights to decline until you choose the lender you ultimately wish to work with.

Without continuing and writing a novel, I would be happy to answer you questions further privately should you wish to contact me. Each of the types of lenders I have listed above, I have trusted professionals that I would be happy to direct you to. This should be a very exciting milestone in each of your lives and I encourage you to seek professionals to make this experience first class! If nothing else, I wish you the best of luck on your current and future endeavors!

Welcome to Oregon!

Kara Schmidt
Keller Williams Realty
Eugene & Springfield
2644 Suzanne Way Suite 100
Eugene, Oregon 97408
541.242.5148

The best advice is buy before Dec 1st do not miss out on the tax credit. Good luck!

First, learn the neighborhoods. In a market like this some neighborhoods will continue to lose value for the next couple of years (because they were overvalued), while others will lose very little, if any. Next, find out what first time buyer grants and loans you qualify for. Eugene has the Homebuyer's Assistance Program, Springfield has SHOP, which is similar, but both run out of money very quickly and income limits are low. You can also piggy back a $1500 grant from OBA or OMBA on HAP if you qualify for it.

Another program, Oregon State Bond, is currently out of funds but will get more this summer. And of course there is the $8,000 gift from the stimulus package.

I would be happy to recommend a couple of experienced lenders who do lots of first time buyer loans and know about these programs and FHA, but I don't want to break the spam rules. If you want to email me I'll send them to you, and I won't pounce on you! (Low key, no pressure, and emphasis on education are our watchwords.)

Sharon Aly Owner/Broker
Friends and Neighbors Realty
sharon@fanrealty.com
541.915.8969

Dear Ryan,

Congratulations on your move to Eugene and the decision to buy a home!! These are excellent questions for a mortgage broker to answer. I have several that I work with frequently and would be happy to refer you to so you can get some of your questions answered. I specialize in working with first time buyers, so if you have any questions on which mortgage broker would be a good fit for your situation or any other real estate related questions I would be happy to help however I can.

Please feel free to call or email me:
541-554-9435 or stephanienichols@comcast.net

http://www.stephanienicholsteam.com/