Local real estate so far escapes national problems
- Sam Bennett
- Lake Oswego Review - News
Last week, as the subprime mortgage market crashed and the stock market tanked, Mary Jo Avery was making one deal after another.
'I sold five houses in one day,' the principal broker from Re/Max Equity Group, Inc., in Lake Oswego said. 'I think I'm going to have a good third and fourth quarter.'
While some parts of the country are reeling from the bursting real estate bubble, local Realtors and brokers say they doubt Lake Oswego and West Linn will be casualties in the downward cycle of growing inventory and fal-ling prices.
'People have money and they still want to do something with it,' said Kristina Larsen, president of Larsen Luxury Estates Internationale of Lake Oswego.
'It's a tougher market than it was two years ago when things were flying off the shelf, but people are going to continue on with their lives.'
This week, Larsen said she will be showing three properties, one in Lake Oswego, valued at more than $3 million each.
Local Realtors said the recent credit crunch - which is making it more difficult for first-time buyers and those without a down payment to buy a home - is part of the market's return to normalcy.
The double-digit growth in property values witnessed in the last few years will be replaced by three or four percent growth locally, if any, in the next few years, Realtors said.
That's not a bad thing.
'Everybody knows that it was time to adjust,' Avery said. 'If it kept going in the direction that it was going, people wouldn't be able to afford homes. People with no down payment are not going to be able to buy anything for awhile. You have to have some cash to buy a house now.'
Although Realtors sound confident, it's too early to say how the anemic housing trends seen in the rest of the country will trickle into Lake Oswego and West Linn. Recent data may show that the normalizing of the real estate market in other areas could lead to fewer sales, even in Lake Oswego and West Linn.
July saw a 21 percent drop in the number of pending sales in Lake Oswego and West Linn, compared with the same month last year. For the first seven months of the year, sales are down 7.4 percent, compared with the same period in 2006.
The number of home sales, including condos, in Lake Oswego and West Linn in July 2004 was 194, compared with 138 this year. The number of listings in our areas went from 555 in July 2004 to 1,008 this year - nearly double the inventory.
Nationwide, banks and lending institutions have tightened standards and can no longer afford to give out risky loans. Americans who jumped into the housing market with little or no down payments and who signed up for adjustable rate mortgages are finding that higher interest rates mean larger monthly mortgages, leading to an increase in foreclosures.
Even larger loans to qualified borrowers, so-called jumbo loans of more than $417,000, will come with higher interest rates.
One advantage that buyers of local real estate have is cash. John DeCosta and his wife Priscilla, Realtors with the Hasson Co. Realtors, who sell in Lake Oswego and Dunthorpe, said their clients usually have enough cash to buy half or all of the properties they are shown.
'In Lake Oswego, we are less sensitive to interest rates,' said John DeCosta. 'It's a convenience when they are low, but not a necessity.'
Brian Bushlach, a senior adviser with Alpine Mortgage Planning, said affluent clients will not be affected by lenders' credit tightening.
'Most of the loan programs that were available before the credit crunch are still available,' said Bushlach. 'But the underwriting requirements and credit score requirements have been raised. It's almost like the old-fashioned mortgage - you have to have a job and good credit.'
'We can't expect every year to be 2005,' said Dave Cook, a managing principal broker in Re/Max's Lake Oswego office. 'We still have extraordinarily low interest rates, inflation rates are still good and employment rates in Oregon are good.'
David Nelson, CEO of the Home Builders Association of Metropolitan Portland, said the Portland area housing market hasn't seen the drop-off in values in other areas such as Southern California, Las Vegas and Florida.
'The good news is that Portland's housing market remains stable,' he said. 'Granted, the market of a couple years ago is gone, but what we have now is more balanced and demonstrating good value.'
At Riverwood Park, a six-acre single-family residential development on Lake Grove's Pilkington Road, spec houses have sold well.
Tim Walker, a co-owner of the development, said the first three homes have sold, in the $950,000 to $1.5 million range. Another four will be put on the market next week, and will be listed in the $850,000 to $1 million range.
'We are giving some really incredible value with a lot of amenities,' said Walker. 'People who have good credit and the financials to support the purchase can still get loans,' he said.
Walker said he has not had to downwardly adjust the asking prices for the homes.
But, John DeCosta said, with inventories on the rise, sellers will have to be savvy with their pricing.
'If the seller is realistic, they can sell the house without much problem,' said DeCosta, whose listings average in the $900,000 range. 'They just have to be realistic in price and presentation. You didn't need a home-stager two years ago, but home-staging is expanding tremendously.'
'If you want to sell a house, you might have to drop the price a couple bucks and you're out of there,' he added.
Avery said the days of 'aggressive pricing' - in which the seller could set the price at a high level and most often get it - are gone.
'If your home is priced competitively, it will sell,' she said. 'That's the kind of market we're in. We still have life in our market.'
If a seller doesn't want to list at the lower price, then they may find it sits on the market longer.
If prices stagnate for a few years, or even go down, it's all part of the correction process, Avery said.
'It's more a process of adjusting to prices where they need to be,' she said. While other areas of the country could see severe drop in home values, Avery said she doesn't predict the same for this region.
'Oregon is pretty independent,' she said. 'I don't think that will really affect us here in this slice of heaven.'