Glimmer of hope emerges in real estate market

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Local real estate officials released figures Friday showing continued declines in home values but noting that a drop in the number of houses on the market is a good sign.

Andrea Bushnell, chief executive officer of the Oregon Association of Realtors in Portland, held a news conference at the Rogue Valley Country Club to say that the steady stream of bad news about foreclosures in some parts of the U.S. — especially California, Nevada and Arizona — does not typify Oregon, which has stayed in the bottom five among the 50 states for foreclosures.

Bushnell said the shrinking inventory of homes for sale in Jackson County, down 16 percent from a year ago, indicates that stability is starting to return to the market. She did say that demand may continue to decline for six to 12 months.

"When you've got a big inventory, it's less healthy," Bushnell said. "We're seeing a return to normal, compared to 2003, when we had a screaming hot market with escalating prices that priced a lot of people — including the elderly and first-time buyers — out of the market."

While not making any predictions about when values would strengthen again, RE/MAX broker Colin Mullane, chairman of the Southern Oregon Multiple Listing Service state committee, said Oregon, unlike Nevada, is not overbuilt with unsold new homes "surrounded by tumbleweeds."

Supply here, however, remains ahead of demand by many months — and buyers' decisions are now clouded by other factors in the economy, especially gasoline prices, Mullane said. That means it may be six to 12 months before demand and home values begin picking up.

Mullane said, with low interest rates at just over 6 percent and declining values, now is a good time to buy. Buyers who wait for further value drops, he said, may lose that advantage because of increasing interest rates.

The Multiple Listing Service releases monthly figures on pricing, sales volume and days on market, but Mullane noted that values are median prices, meaning the midpoint, with half the sales above that mark and half below — and should not be read as the actual change of value in an individual house.

He said those figures are skewed in part because "jumbo loans" of more than $417,000 are not backed by Fannie Mae or Freddie Mac and have become much restrictive during the market downturn. That means the lower end of the market has been more active, which affects the median price, he said.

"The median price is an anomaly. You have to get an appraisal to know the value," Mullane said.

A more realistic view of the market here, he said, is that values are off about 10 percent from the peak at the start of 2005, meaning a $400,000 home then is worth about $360,000 now.

"Where we're at now is that people are realizing real estate is a long-term investment and if you hold it 10 years, it will correct itself, but if you're trying to make a lot of money very quickly, you won't get that," said Mullane.

The market in Jackson County experienced 17 months of increasing inventory before demand started falling in early 2005, with values doing likewise later in the year, said broker Adam Bogle of Coldwell Banker Pro West in Ashland. Bogle said that appreciating values are followed in almost every decade by corrections.

"There's no way of knowing when the bottom of the market has been hit till six months after, when the data comes in," he said. "Then buyer confidence has to come back."

The lesson that should be taken from the real estate boom and downturn, said Mullane, is "the same as the dot-com boom, that you shouldn't treat real estate as a short-term investment and you should look realistically at what you can afford."

John Darling is a freelance writer living in Ashland. E-mail him at jdarling@jeffnet.org.

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