Weaker housing market predicted
Many homeowners are likely to choose to remodel rather than sell, the experts say
The outlook for housing in the Portland metropolitan area in 2007 is not as good as it has been, but the news is not all bleak, either.
That was the verdict from economists addressing the annual Home Builders Association Housing Forecast last Thursday morning.
'All in all, we tend to believe that 2007 is a slower growth year, but the economy will not tank,' said Dae Baek, acting chief economist for the state of Oregon. 'And if you hang in there, the second half of 2007 will be better.'
Baek added a personal aside that alluded to his recent shift to the top economist position. 'I wish I was here two years ago because the picture was rosier,' he said. 'But I'm here now, and I have to deliver some mixed messages.'
Economist Jerry Johnson of Johnson Gardner, charged with discussing the local economy, delivered a similar message but also stopped short of a gloom-and-doom prognosis.
Although housing prices in Oregon have historically lagged behind the rest of the nation, said Johnson, 'we've been rapidly catching up the last couple of years.'
In spite of that, though, homeownership has climbed steadily for 10 years, said Johnson, admitting some surprise over the most recent increases.
'Last year we thought they couldn't go much higher,' Johnson said of the home ownership numbers. 'And they're higher again.'
After offering glimpses of several economic indicators, Baek called the shrinking number of housing permits and housing starts 'almost a recessionary adjustment.' In Oregon year to date as of October, he pointed out, permits were down 14 percent.
'If you look at the details, a lot of weakness comes from the housing market,' Baek told the audience of 630 builders and related businesses filling the Convention Center room.
Secondary effects of the housing slowdown will linger a while, said Baek, resulting in lost jobs and income in housing-related industries, unsold home inventories and slowing house prices, slower consumer spending and a decrease in home sales - in spite of the fact that the median sales price of existing single-family homes will keep rising.
Obviously aware of who he was talking to, Baek tried to put a spin on his talk: 'What we see is, yes, the economy is slower, but you have to think of the positives.'
And among the positives, according to panelist David Ludwig of Vista Market Intelligence, is the effect the housing market will have on anyone in the home remodeling business.
Following a review of six different demographic groups, ranging from 18- to 29-year-old members of 'Generation Y' to senior citizens, Ludwig pointed out that 60 percent of the entire market plans to undertake a remodeling project next year. That represents 452,000 households, he said, at an average expenditure of $5,645 apiece.
Of those eyeing home improvement projects, said Ludwig, 46 percent plan to do all of the work themselves, 39 percent plan to contract some of the work and 15 percent will hire someone to do all of the work.
Vista's statistics show that the younger age groups, Generation Y and 'Generation X' (age 30 to 41) have high expectations for buying homes in the coming year - 37 and 28 percent, respectively - despite a less-than-inviting housing market.
Interestingly enough, said Ludwig, the 'young/old' group (61 to 76) and seniors show practically no interest in home-buying. 'That's the 61-to-dead group,' he joked, including himself in that demographic. 'We're not going to be buying much.'
'We don't see a crash,' said Ludwig, speaking for the panel. 'But we do see continued slowdown.'
What can individual home builders do about it?
'Understand your customer and your market,' said Ludwig. 'It's very critical.'