Housing market looks grim for 2008, but should bounce back
There's good news and bad news for the local housing market: 2008 doesn't look so hot. On the other hand, things should bounce back in 2009.
That was the message delivered to builders, real estate professionals and other interested parties at last Thursday's annual housing forecast put on by the Home Builders Association of Metropolitan Portland.
Economist Jerry Johnson predicted home sales will decline in 2008 by 15 to 20 percent and that the Portland area will see 'negligible price escalation.'
New home construction should be down 20 percent in 2008, said Johnson, and he added that remodeling will also remain 'a little bit down.'
While he ran through a series of charts on vacancy rates, employment changes, migration into the Portland area, residential permits, home prices, sales trends and standing inventory, Johnson suggested the market can recover - 'assuming continued economic growth.'
That theme was played by the other two panelists, former U.S. Bancorp economist John Mitchell and David Ludwig, of Vista Market Intelligence.
The big news in the demographics, said Ludwig, is that younger buyers - Generations Y (born in 1977 to '94) and Generation X (born '65 to '76) - 'will dominate the home-buying market' and account for 60 percent of buyers in the next five years.
Meanwhile, older buyers - 'in the 62 to dead group' - are looking to downsize, Ludwig added, and becoming less of a force in the marketplace.
'You've got to talk to your consumers before you start building,' Ludwig said to the builders in the room.
n It will be 'another slow year in 2008, possibly down slightly from 2007 levels.'
n The coming year should be the end of the slump, he said. 'I look for the road back in 2009.'
n The market will be pushed by younger buyer (age 18 to early 40s).
n Addressing lifestyle will be critical to maximizing profitable sales.
Mitchell titled his presentation 'Momma said there would be times like this - but not very often!'
We've had it pretty good for a while now, Mitchell reminded the roomful of professionals. For the building industry, he said, the last few years have been 'the stuff of legends.'
Home ownership rates climbed from 1998 to 2006, when they peaked at 69 percent. Prices also peaked in '06, when residential permits were strong, financing conditions were good and homes were relatively affordable.
'And then August happened,' he said. 'The props were gone.'
Mitchell reminded the audience that unlike most other parts of the country, Portland has enjoyed a continually growing market, even if the rate of growth has slowed.
'We're likely in the seventh year of this expansion,' he said. 'This is not a new story.'
Surrounding the market, he said, is real GDP (growth domestic product) growth of 2 to 2.3 percent and an inflation rate of about 2.5 percent.
'What's likely to happen? I'm still willing to bet we're going to make it through without a recession,' said Mitchell.
There's an inventory problem that has to be worked through, he said, adding, 'It's not going to happen instantly. It's going to take time.'
The coming year will be be one of slow growth, Mitchell predicted.
'Oregon will grow slowly.'