Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or perform any legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys, Andy@BLSforAttorneys.comSo much of what is going on in this country's economy appears tied to the value of real estate, as in how much those "Troubled Assets" addressed by the $700 billion Congressional bailout bill are really worth. And perhaps no other index is tied so closely to the pace of personal bankruptcy filings than that of home values. So to get some good ideas where the Portland area's bankruptcy filings are heading and how quickly, here's a quick but enlightening look at Portland's home values.
Yesterday Standard & Poor's released its S&P/Case-Shiller Home Price Indices reflecting data through July 2008. This tells us the monthly changes in the values of existing single family homes in twenty urban areas, including Portland. By analyzing these Indices we can also see the rate at which home values are increasing or decreasing, and can compare these rates to the average among these urban areas. The local numbers reveal important trends, especially when compared with this national urban average. (In the rest of this Bulletin I will use "national" to mean "twenty urban areas average".)
The Peaks in Home Values and Subsequent Trends
In the national data, home values peaked in July 2006; in Portland the peak occurred exactly 1 year later in July 2007. The national values declined only incrementally for a full year, going down only 3.8% in that time. But then in the year since then to July 2008, the values have come down much more steeply, by 16.3%.
In Portland, from July 2006 to July 2007, while the national values were going down 3.8%, Portland's were still going UP by 3.8%, coincidentally. And from July 2007 to July 2008, while the national values were going down by 16.3%, Portland's went down by only 6.6%.
Query: Are Portland's value decreases going to accelerate to match the 20-urban area averages because we are in a similar trend line just a year later?
The Very Recent Trends
Is the pace of the decline starting to slow nationally? What's the recent pace of the decline in Portland?
Looking at the data showing the declines during these in 3-month blocks:
Nov '07-Jan '08 / Feb-Apr '08 / May-July '08
National: Declining home values in each of those blocks of:
6.4% / 5.9% / 2.2%
Portland: Declining home values in each of those blocks of:
3.4% / 2.2% / 0.4%
So the pace of the decline nationally has slowed, especially in the last three months, but it has as well in Portland and even more so, seemingly coming close to bottoming out here. Indeed in the last 6 month, 2 of the months showed slight increases in house values in Portland, whereas the national monthly values have been decreasing every single month since the July 2006 peak.
Comparisons to Prior Economic Downturns
The last time there was a significant national decrease in home values was in 1990-92, when, in contrast to the present 16.3% year-to-year decrease, the largest decrease in values was only 6.3%. During the dot-com/post-9-11 downturn of 2001-2002, national home values did not decline but merely slowed their growth from about a 13% increase year-to-year to a brief low of about 7%, but then quite quickly recovered and reached a peak of about 20% in 2005, before starting the consistent monthly declines to the present.
In Portland the 1990-92 downturn was much milder. During the years 1990 through 1992 Portland did not have ANY year-to-year reductions in value, while the national values were down a significant 6.3%. On a year-to-year basis the Portland value INCREASES were more than 5% annually, while nationally home values were significantly decreasing. However during the 2001-2002 period, the home values in Portland increased at a rate lower rate than the national rate, about 7.2% during 2001 and about 5.0% during 2002, going a little lower in the rate of value increases and staying at that lower growth rate for close to two years while the national rate rebounded quickly.
Conclusions
The major national economic disturbances of the past 3 or 4 weeks and how they will play out in the next few weeks and months will have a major impact on the availability of mortgage credit and on consumer confidence, thus affecting national and local home buying activity and home values. But aside from that huge ambiguity, based on the data summarized above, the national home value decrease has slowed but apparently not yet reached bottom. However, Portland's rate of decrease has slowed much more, in the last few months almost flattening out, seemly coming very close to hitting bottom. While Portland's home values had continued to increase from July 2006 to July 2007 for a full year after the national values had peaked and started to decline, in turn the decline in Portland since then has not come close to the steepness of the national decline. So Portland's last three-four month plateauing of its home values may signal that, as in 1990-92, the downturn here will be much shorter and milder than nationwide. If so then we may have indeed hit bottom and be beginning a slow increase in values. However, given the tsunamis roiling the national financial markets, predictions based on past history appears even less reliable than usual. If there is a radical reduction in credit availability, or, as expected, last month's slight improvement in consumer confidence is seriously shaken by the events of the past few weeks, Portland's home values could very well shift back to a downward trend.
by: Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
© 2008 Bankruptcy Litigation Support for Attorney
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