I heard that the Portland OR area is just now feeling the burst of the bubble. What do you think of this?

Asked by Sarah, Tigard, OR Wed May 7, 2008

So I put a bid in on a home in the SE near Hawthorne
A 2 Bed room at 329,000!
I think that is much!
Now CNN Money says that PDX is now being slapped in the face and the bubble has burst?
What does that mean to buyers?
Can I pull out of the deal?

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Answers

17
Billy Grippo, Agent, Portland, OR
Wed May 21, 2008
I don't know if the bubble has burst like the rest of the country, but Portland is definately a buyer's market.

Since everyone is in agreement here that we're in a buyer's market, then it's not a big jump to say this is a great time to buy. There's a great selection of good houses to choose from, you don't have to make a decision in an hour like the previous over heated sellers market we were in. Sellers now are willing to negotiate with buyers. Financing has tightened up, but for most borrowers with good credit, there are some tremendous deals out there with low interest rates. The big question that nobody can answer is when is the bottom of the market. The trouble with waiting for the bottom is one does not know it's the bottom until it's on the way up, and then you've missed it. The question buyers should ask of themselves is how long will you remain in the house.

Insider's tip;I recommend buying the best house with a good layout , in good or better condition, in a demand location, and one you actually really want, and NOT be fixated on "getting a deal".

This market has demonstated that there are still multiple offers happening on the "good houses" You want the house that will be in demand when you go to sell it. There are plenty of deals out there where the seller will take far less than listed, but those are the houses that needed to be deeply discounted anyway. Good luck.
Web Reference:  http://www.billygrippo.com
2 votes
Jill Blevins, , 97219
Tue May 20, 2008
As a realtor, my job is to get the best price for my buyers or sellers. It doesn't serve me well to do anything else, and I've lost sleep many times worried about clients' offers. I just lost a deal where my buyers offered over the asking price and still didn't get the home. I just closed with buyers who made a full price offer on a very stale short sale, which, the day after their offer, another offer came in just below, meaning they would have also lost out with a lesser offer.

Sarah, you don't have to use a realtor if you don't think we have value -- there's a lot more to this job than just bringing buyers and sellers together.

If you're trying to make a quick profit or you're waiting for the market to hit bottom, your advice seems sound and perhaps the stock market might be a better vehicle for you. If you want to own a home, and want a particular style, location, price, and you find it -- then it's a good deal, isn't it? A few thousand dollars over or under isn't going to change the satisfaction you have waking up in a home you enjoy.
2 votes
Laurel, Home Buyer, Portland, OR
Tue May 20, 2008
Sarah -- You have to look at other similar properties (not just the comparable recent sales your realtor provides). Look up the nearby addresses in the same neighborhood on Portlandmaps (what did properties next door sell for -- whether last year or ten years ago?) That may help you determine whether you're getting a fair deal or not. Yes, take into account whether the structures are similar, etc.

To the realtors who have replied here: I am always disappointed by realtors responses because you seem to have attended the same "talking points" session for discussing the current market. Those of us looking to buy understand the meaning of the terms "over priced" and "price reduction." Realtors, however, prefer to speak of "right pricing," as if to refuse to acknowledge that those properties receiving multiple offers are now listed below comparables.

Some of the distrust buyers have for realtors is a persistent, seemingly industry-wide tendency to discuss current conditions using obfuscating language. Rather than try to deny the fact that prices are coming down under "right pricing" language, how about discussing it openly? I had a discussion with a realtor recently who refused to acknowledge that price reductions were needed to sell a property, instead he insisted that it need only be "right priced." Duh. And "right priced" means what in this market? How about price reductions.

I'm not looking for a sales pitch here, just a wider realization among realtors that buyers respect honesty and the language used here isn't exactly honest. It's marketing talk and it probably isn't serving you well.
2 votes
PDXOutsider, , Portland, OR
Tue May 13, 2008
Most real estate agents here are just quoting RMLS appreciation stats, which show the latest 12 months over the previous 12 months. They are still showing appreciation because they still include the peak of last years bubble. Comparing March 08 to March 07 shows a decline for the area, and at least a 5% decline from the peak in July.

If you'd like an objective analysis of the market, take a look at the site linked here for all the data you could ask for.

You also haven't stated your goals. If you plan to be there 5-10 years then you'll likely ride out any temporary downturn. If you're planning on being there 3 years or less, I think you'll lose money., but otherwise that's not a bad price.

As for getting out of your contract, that depends on how you wrote it, and you'll need legal advice or at least a good agent to help.

But yes, the bubble is bursting in Portland, no matter what the agents say. Good luck, and next time ask these questions before making an offer!
1 vote
Jill Blevins, , 97219
Fri May 9, 2008
The last two transactions I've worked on have both had multiple offers. One home, which was on the market for nine months with no activity, had four buyers competing for it. I've currently got a home on the market with four very interested parties.

You can't generalize, even in Portland. Block by block, sometimes house by house, conditions are dramatically different. If it's a good buy, it's going to go quickly. Prices on desirable homes have increased, regardless of what's going on nearby.

If you pull out of the deal, would you regret not owning that home in the years to come? That would be the question I'd ask you. CNN Money isn't going to wake up in that home every morning.
Web Reference:  http://www.jillblevins.com
1 vote
Craig Loughr…, , Oregon
Thu May 8, 2008
Whether Portland prices are appreciating depends on what statistics you look at and the time periods you use for comparison. It also depends on what a person considers to be "Portland." Some brokers use "Portland" to refer to the entire metropolitan area, which takes in 5 counties, while others use the name to refer the more urban and suburban parts of the 3 counties that Portland touches, while still others use the name to refer to just the area within the incorporated limits of the City of Portland.

The fact is, seasonally adjusted, non-condominium home prices have declined in a lot of communties around the 5-county Portland metropolitan area, as well as in some parts of the City of Portland itself. Whether that depreciation will continue and at what pace is anybody's guess. To be sure, however, the big run up in prices is over (for now).

What all this means to a buyer depends on what the buyer is buying and why. You need a competent, responsible counselor to advise you. And if you're thinking about backing out of a purchase agreement, don't fall for the general advice available on this forum. Talk to a real estate attorney. Make sure to give him copies of all your contract documents, and explain your situation in detail. Then, and only then, can you make the right decision.
1 vote
Elisha Joyce, , Portland, OR
Thu May 8, 2008
Don't believe the hype! The national media may be right that the slow market is moving into Portland, but by no means have we gone backwards like other hard-hit markets. We are simply flat. For example, the March market action based on the MLS stats clearly shows the average sale price appreciated 4.9%. If you look at NE and SE areas in particular, YTD appreciation has been 6.9% and 5.0% respectively. If anyone has been hit "hard" as the national media suggests it is the suburban areas where new construction has saturated the market. The urban, close-in "city-dweller" markets, however, are still faring well provided they are priced right (in light of the comps that are available now) and stand out above the competition. (Portlands close-in neighborhoods have high demand regarless of the overall market because of the unique neighbhoord offerings and vintage charm of the homes.) In my opinion, the BEST place to buy in Portland right now is IN the city into a vintage charmer with great walkability.

Now, in regards to your particular purchase, the best resource is your agent. Your agent put in the offer, so your agent knows the contract (i.e. whether or not you have an opportunity to still pull out) and your agent can provide you with the comps for the particular house (although I agree with one of the other responses that said $329K doesn't seem above the norm for Hawthorne... and, ideally, the comps would be been reviewed BEFORE you put in your offer).

Finally, the "bubble" (even if we agree there is one that has burst in Portland) affects Sellers and the prices they can reap on their homes. From a Buyers perspective, this is a GREAT time to buy because Sellers are likely willing to negotiate. I mean, with high inventory like we have Sellers are doing what it takes to get you to take their home over another. Buyers have choices and Buyers have power in this market. So, again, I say breathe easy provided you make a thoughtful, comp based offer.
1 vote
Popgoesbend, Home Buyer, Bend, OR
Wed May 7, 2008
The Portland market is slower to react than the rest of the country, but the decline has started. Portland may be one of the worst markets in the country to buy in right now as it has just started it's downhill roll. Do some more research, but there is no way I would buy in Portland right now.
1 vote
Corey, , Northwest Heights, Portland, OR
Wed May 7, 2008
Hi Sarah,

I feel compelled a bit to give you unsolicited advice from the inside as a Portland resident for the past four years. For reference, my wife and I are selling a condo in downtown and looking for single-family homes on the Eastside, so I've kept up with Portland trends. However, I'm no where near a professional!

Overall, I'm sure you're aware that Portland has faired well in the recent real-estate downturn. Unlike the suggestion that that might be due to less sub-prime mortgages (I question that notion) I'd suggest the market has been bouyed by out-of-state buyers coming in, especially those coming from California who have "cashed out" of their expensive homes in Silicon valley and moved here. Now, as those homes in other places aren't selling, I do see the market slowing down here. An additional factor that has helped is strict land-use zoning which hems in urban sprawl. It's interesting that lots of folk forget that factor.

As for your particular house in question, but not seeing the home, 329K for Hawthorne does not seem unreasonable. Ideally you'd want to be in the 50s (street number) or lower as it's a very hip (read: hippy) and desirable area. Our realtor advised us we would HAVE to look 400s and higher for a reasonable home for closer-in SE. If it's in that area, and bid accepted at 329, I'd say geez, that's a good deal.

So what's going to happen long term, who knows? I CAN imagine PDX could see a 5-10% decline in value for the short-to-mid-term. (Not as bad as some, but it's irresponsible to say Portland is the ONLY city to escape this downturn.) All this means is, don't try to flip the house, but live in it and enjoy. Overall, Portland economy is solid, the people and dedicated to keeping the city interesting and unique, and it seems like everyone and their cousin wants to move in. I remain that PDX is a very solid real estate investment!

Sorry for the long-winded answer! I jsut love real-estate, fiscal policy, and economics!
1 vote
Brian Ramsay, , 97209
Wed May 7, 2008
Sarah,

If you feel that you no longer want to purchase the property there is always a way out of the deal. It may lead to you loosing your earnest money as apart of it, but then again if you feel that over the life of owning the property you will lose more owning it than backing out, then go for it.

When clients come to me to help them decide what direction to go in buying real estate, I tell them this. Real Estate is a long term investment. If you purchase wisely and with a plan in mind you can not lose. There are many MANY tax advantages to owning real estate that no other market can give you. If you plan to buy and own for less than 5 years and not reinvest into the market then you should just rent and talk to a financial planner to make alternative investments. I have a client now that made $900,000 after taxes, mortgages and other costs of ownership last year from his rental properties and he holds 80% loans on all of them and didn't sell one (he owns 1019 units). He has been doing it for the last 13 years and hasn't sold a property for 12. So regardless if you own one property or 1000 when you plan your investments and make wise purchases bubble or no bubble you can't lose.

Best of Luck,

Brian Ramsay
Realty Trust Group Inc
Principal Broker
503-416-3380
Web Reference:  http://www.oregonstyle.com
1 vote
Julie Fugate…, Agent, Tualatin, OR
Wed May 7, 2008
The Portland Market is still the second best in the country (second only to Charlotte, NC). Buyers can get great deals, but we didn't have as many sub-prime loans in our area and thus have been somewhat insulated from the sub-prime melt down. The Hawthorne district is a very desireable area to live in - close to downtown and with great character. Check with your agent about backing out of the deal - you don't want to lose your earnest money dollars. However, I don't think that you should panic. Over the last three months, Portland has gone from 12.3 months of inventory (homes for sale) to just about 9 months. That means homes are selling. In addition, the Portland Association of Realtors says that the area is still appreciating at almost 5% - that's incredibilly strong compared to the rest of the country. Remember that Real Estate is always a "local" market and that can even mean pocket areas within a greater metropolitan area. Hawthorne is probably a pretty good bet.
1 vote
The Shelly C…, Agent, Portland, OR
Wed May 7, 2008
According to March '08's Market Action report, Portland is still seeing appreciation. I personally am selling my listings within a month of them being placed active on the market. I tend not to put too much stock in national publications, according to them the bubble should have burst in Portland years ago. We are ranked #1 as the place to live for retirement, we are consistently in the top ten for livability, and have a large influx of out-of-state buyers. Sure, we have slowed down to a more realistic market, but that is to be expected. Can the Portland market decline? It is quite possible, especially if our national economy does not improve or worsens. But as with the stock market, real estate will eventually cycle back.
As for your question about your transaction, I suggest you speak to your Realtor. He/she can provide you comps for the Hawthorne area as well as explain the legal ramifications of your contract.
1 vote
Ed Burnham, , Portland, OR
Fri Jun 27, 2008
Hi Sarah-

If you’ve found a decent-sized 2-bedroom home in nice, move-in condition in a good Hawthorne location, for under $350,000, you and your agent have done well. Hopefully by now you've closed the transaction and are happily moved in and enjoying your new home!

This answer, then, is more for others who are considering purchasing a home in this market.

There’s an excellent article from Willamette Week on the subject: http://wweek.com/editorial/3322/8789/ , and another on the challenges of renting, especially in our close-in Eastside neighborhoods: http://wweek.com/editorial/3421/10750/

Bottom line, whether you rent or buy, you’re buying a house, either your own home, or the landlord’s house. The difference is, short-term, your exit options are simpler and less costly if you’re renting. You have less exposure to short term home price downturns.

Compared to the national figures, and the metro Portland figures, the Hawthorne area, Zip 97214 in particular, is holding up well. Here’s a link to market statistics for that Zip code: http://www.trendgraphix.com:80/ORE/charts/7214-01-02-0134-1-…

No one can predict the future, but, in my opinion, should gas prices stay high, demand for homes in the good close-in neighborhoods will lend a lot of support to prices there. I think it's no coincidence that, in the greater Portland metro area, some of the areas hardest hit in the downturn are in the suburbs.

Here’s an interesting recent article from the New York Times on the subject: http://www.nytimes.com/2008/06/25/business/25exurbs.html?adx… And an article in The Oregonian: http://blog.oregonlive.com/breakingnews/2008/04/economist_sa…

If you’ve read this far, you might be interested in other articles and links posted on my website: http://edburnham.mywindermere.com/

Rent or buy, happy home hunting!

ED

Ed Burnham, Real Estate Broker
Windermere/Cronin & Caplin Realty Group, Inc
825 NE Multnomah Street, Suite 120
Portland, OR 97232
(O) 503/284-7755
(VM/Direct) 503/497-5209
(Cell) 503/314-3555
(Fax) 503/220-1498
Visit my website: http://www.edburnhamhomes.com
0 votes
Sam, Home Seller, 97034
Wed May 28, 2008
Do you like the house? Would you be comfortable in it? Happy?
Do you want to put it on hold for a couple of years just to see if you can buy it cheaper?
I've lived in apartments and rental houses and my own places - with all the work and expense, nothing beats having own place where you can set it up the way you like it.
If you look for investment - look at the stocks and bonds and commodities and rental properties. You might come out better off than trying to make money on your own place.
I talked to a lot of people and the consensus I got - one always buys for more than he/she thinks it should cost and sells for less - with very few exceptions.
The market that was the last several years is not the rule - it's a fluke. Probably won't repeat in our life time.
So, you might want to think what this place means for you - emotional comfort is something very hard to put a price tag on. Just my humble opinion.
0 votes
Skeptictank, , Beaverton, OR
Sat May 24, 2008
Sarah: you can still pull out of the deal based on the inspection.

Yes, reality has hit realty in PDX. The reality is that median incomes in Portland cannot support median prices here now that the easy credit has dried up. Something like 30% of loans made in the PDX area were Interest Only loans in 2006, 2007.

You also have to consider that the Portland economy has historically been rather fragile: we were very hard hit in the .bomb crash - in fact we had some of the highest unemployment rates in the US well into 2004. Our economy isn't nearly as diverse as Seattle's so recessions tend to hit hard here. Consider that a large chunk of economic activity in the last few years has come from housing (selling houses, loans and granite counter tops to each other) and now that's drying up rather quickly. The restaurant biz has been one of Portland's growth industries in recent years and it's getting hit pretty hard now.

Bottom line: Wait another 2 or 3 years before buying. Chances are pretty good that prices will be lower by then by at least 15%. If the economy sufferes a prolonged recession it wouldn't be out of the question to see prices down by 20 to 30%.
0 votes
Wendy Boso, Agent, PLTD, OR
Wed May 21, 2008
If you are now renting and moving into the property you made the right decision. Real Estate is like a 401K in that you need to hold it for awhile. (3-5yrs is a good rule of thumb) If you had bought at the height of the market (2005-2007) then you may need to hold it even longer. But buying now when sellers are offering more concessions is an A+++ move. You can consider yourself a savy investor.

If you need to pull out you should speak with your agent. Depending on your earnest money agreement you should have a disclosure period and an inspection contingency.
0 votes
Stephanie Lu…, , Portland, OR
Mon May 19, 2008
I would have to say that the market I work in, has been pretty strong. I wrote an offer for a client who was looking to buy a condo near the park blocks and we competed with 4 other offers. I sold a 2 bd Bungalow off of SE 88th in march and it was listed for 4 days and we got 3 offers...so I think that what this is telling us is that there is still a strong demand for properties in Portland. It is all about pricing right. The Hawthorne district for example is still VERY popular, and there are SO many poeple who would love to live in this neighborhood...that isn't going to change just because the market inevidablly has to go up and down....that is just how it works. Since the location is so popular, I would have to say that from your short description on the property, you are paying what it is worth. I know that in that location, it would be a great rental property as well...Anyhow, it is never a black or white answer, but in general I feel that Portland is still appreciating well. What goes up must come down, but what decides that is supply and demand. And buyers are still out there writing offers on properties that are priced well.
0 votes
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