- The median home price in the Portland area declined 13.9% over the last year to $246,200 as of Q2 2009, continuing a weakening trend.
- Local job losses over the last year were sharp at -56,800 (-5.5%), contributing to weak housing demand.
- Mortgage rates remain low while affordability is improving, with the monthly mortgage payment-to-income ratio at a historically strong 15.4% in Q2 2009.
- Foreclosure rates on prime loans are low at 0.4% while rates on subprime and Alt-A loans show large local increases compared to a year ago but remain below national averages.
1. Portland Area
Metro Market Report, Second Quarter 2009
Today's Market…
Median Price (Red Line) and One-year Price Growth
$350,000 25%
$300,000 20%
15%
$250,000
10%
$200,000 5%
$150,000 0%
-5%
$100,000
-10%
$50,000 -15%
$0 -20%
2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
Portland U.S. Local Trend
Price Activity
Current Median Home Price (2009 Q2) $246,200 $174,433
Prices are down compared to a year
1-year Appreciation (2009 Q2) -13.9% -16.2% earlier and continue to weaken
3-year Appreciation (2009 Q2) -13.2%
13 2% 4.3%
4 3%
3-year (12-quarter) Housing Equity Gain -$37,300 $7,233
Those who bought early in the boom still
7-year (28 q) Housing Equity Gain $67,700 -$39,633 hold some equity
9-year (36 q) Housing Equity Gain $75,700 $6,800
Conforming Loan Limit $418,750 $729,250 Most buyers in this market have access
Ratio of Conforming to Local Median 59% not comparable to government backed finacing
State Home Sales (Red Line) and Sales Growth
1,000s
120 40%
30%
100
20%
80 10%
0%
60
-10%
40 -20%
-30%
20
-40%
0 -50%
2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
Home Sales and Construction Growth Oregon U.S.
*State Existing Home Sales Sales in the second quarter remain
-15.2% -2.9%
(2009 Q2 vs 2008 Q2)
( ) gg p g
sluggish compare to the national average
2. Drivers of Local Supply and Demand…
Local Economic Outlook Portland U.S.
Not
1-year Job Additions (Jul) -56,800 Over the last 12 months, local
Comparable
employment has fallen sharply and will
Not
3-year Job Additions (Jul) -37,500 create a drag on demand
Comparable
1-year (12 month) Job Growth Rate -5.5% -2.6% Weak compared to other markets
3-year (36 month) Job Growth Rate -3.7% -0.9% The rate of job loss is accelerating
State Economic Activity Index Oregon U.S.
12-month change (2009 - Jul) -11.0% -3.3% The economy of Oregon has contracted
more than the rest of the nation
36-month change (2009 - Jul) -10.2% -0.2%
Local Fundamentals Portland U.S.
12-month Sum of 1-unit Building Permits through The current level of construction is 78.6%
2,953 not comparable
Jul 2009 (1,000s) below the long-term average
Excess supply reduction could result in
Long-term average for 12-month Sum of 1-Unit price escalation over the longer-term if, in
13,793 not comparable
Building Permits (1,000s) the future, there is rapid and robust
increase in demand
** Single-Family Housing Permits (Jul 2009)
g y g ( ) Low construction will help to maintain a
p
-45.3%
45 3% -39.0%
39 0%
12-month sum vs. a year ago tight supply and to stablize prices
Construction: 12-month Sum of Local Housing Starts
(Historical Average Shown in Red Dashed Line)
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
3. Affordability
Affordability - Local Mortgage Servicing Cost-to-Income
(Historical Average Shown in Red Dashed Line)
25%
20%
15%
10%
5%
0%
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Monthly Mortgage Payment to Income Portland U.S.
Ratio for 2008 19.6% 19.5% Improving and historically strong; should
Ratio for 2009 Q2 15.4% 15.0% help demand for housing
Historical Average 17.2% 23.2% Good relative to the nation
Recent Trend - Local Mortgage Servicing Cost to Income
(Historical Average Shown in Red Dashed Line)
25%
20%
15%
10%
5%
0%
2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2
4. Median Home Price to Income Portland U.S.
Ratio for 2008 7.1 7.1 Local affordabiltiy has improved, but
Ratio for 2009 Q2 6.2 6.1 could be better
Historical Average 5.6 7.2 Good compared to national average
Ratio of Local Median Home Price to Local Average Income
(Historical Average shown in Red Dashed Line)
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
The Mortgage Market
30-year Fixed Mortgage Rate and Treasury Bond
3.00 7.0
6.5
2.50 6.0
2.00 5.5
5.0
1.50 4.5
4.0
1.00 3.5
0.50 3.0
2.5
0.00 2.0
2004 Q2 Q4 2005 Q2 Q4 2006 Q2 Q4 2007 Q2 Q4 2008 Q2 Q4 2009 Q2
Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)
With the demise of Lehman Brothers in the fall of 2008, risk in the financial markets surged as depicted by the blue bar
above. Mortgage rates fell as prospects for growth withered. Recently, rates have flat-lined while the 10-year Treasurey
bond rate is on the rise. This reduction of the spread between these two rates is a signal that the financial markets view the
mortgage industry as less risky.
5. Looking Deeper….
State Total Foreclosure Rate vs. U.S Average
(U.S. Average in Blue Dashed Line)
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Source: Mortgage Bankers' Association
Monthly Market Data -
June 2009 Portland U.S.
12.5
10.4
Market Share: %
% 89.6% 87.5% The Portland market has a lower share of
Prime (blue) vs.
89.6 87.5 subprime loans than average
Subprime + Alt-A
% %
10.4% 12.5%
There has been a large local increase
1.1 1.1% 2.2%
PRIME: 0.4 2.2% versus a year ago
Foreclosure + REO % % 1.1%
Rate Compared to the nationional average,
0.4% 1.1%
Jun-08 Jun-09 Jun-08 Jun-09 today's local rate is low
There has been a large local increase
15.6% 18.4%
SUBPRIME: 15.6 18.4 versus a year ago
% 17.6 %
Foreclosure + REO 8.8% %
Rate Locally, today's foreclosure rate is low
8.8% 17.6%
Jun-08 Jun-09 Jun-08 Jun-09 relative to the nationional average
A large local increase occurred compared
7.3% 14.0%
ALT-A: 7.3% 14.0 to a year ago
Foreclosure + REO %
2.5% 8.0%
Rate Today's local rate is low compared to the
2.5% 8.0%
Jun-08 Jun-09 Jun-08 Jun-09 national average
The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed
the foreclosure process and are owned by banks divided by the total number of mortgages for that area.
Source: First American CoreLogic, LoanPerformance data