Last year my crystal ball was off by 1.6%. You’ll recall, I failed to eat my Wheaties and ended up erring on how much the market was going to correct for 2010. For 2011, I guessed 5-7% with a possible 10% correction at most. Well, Salem Oregon maxed out in 2011. The average home price dropped 9.7% and the median shifted downward 10.7%. It was a more volatile year than anticipated for home prices as they took a header during the first quarter, but remained at that value for the remainder of the year.
The average home price in Salem ended at $166,976 and the median was $151, 700. Compare that with the average and median home prices for say…2004 and you’ll see a surprising similarity. $164,199 and $148,400. Yep. The bubble never happened. For those of you that purchase in 03-04 who think you have made a profit? Probably not. If you are looking to sell in 2012, you might be told you will break even.
The good news is that with these more affordable homes and incredible interest rates, buyers have been out. I’d say they have been out en force, but there aren’t enough buyers to call it a mad rush or anything. Many agents I know had very busy falls, and I’m hearing from my agent friends, which is true for myself also, that January is busier than usual. In 2011, 57% of sellers were successful in getting their listing sold. Not great but better than the 40% of last year. There were home sales for $30,000 in Salem Oregon in 2011. Mind you, not livable homes at that price, but investors are out in force with trashed out foreclosures getting multiple offers.
I’ve noticed the flippers have started to dip a tiny toe in the water, but most investors are doing buy and hold. The nice drop in inventory that we see by fewer listings is pretty much caused by the MERS debacle that lenders have created, causing problems with their ability to foreclose on homes here in Oregon. The foreclosure numbers, which had artificially dropped in Oregon will be picking back up in 2012 as lenders that can actually produce notes go the judicial foreclosure route. So what does this mean for our 2012 market?
I haven’t had my Wheaties today but I did have green tea and a protein bar for breakfast…that counts, right? I think we will drop maybe another 5%. We could take another 10% hit if the lenders can get their MERS problem dealt with and dump their inventory on the market. That would really hurt so here’s hoping they don’t do that. If the lenders continue at their current pace in placing inventory on the market, I would expect home prices to decline another 5% this year. Unemployment is stagnant but stable at current levels. Inventory is down to around 10 months in Salem and has been at that level for around 6 months. Interest rates are insanely low and buyers are responding. These factors will allow inventory to be steadily absorbed over the coming year, assuming the banks don’t do anything asinine like dump a ton of homes on the market at once.
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Data used in this analysis was crunched from the WVMLS, single-family homes under non-acreage properties.