Really, this isn’t unexpected, is it?
The real estate hangover
You go to a party, drink way too much, and end up regretting it the next day. Many college students go through this unfortunate experience and it is how we learn our limits and how to make better choices for our bodies. The tax credit intervention was kind of the same way…we knew the hangover would come to the real estate market. So what does a real estate hangover look like in Salem Oregon?
The blue outline is what home sales have looked like so far this year. The red is the year 2003. I just wanted you to see what a more normal real estate cycle looks like for the Salem Oregon real estate market, specifically.
Typically as the year goes on we ramp up our sales, then slow down for the rainy season. I get that…who wants to move in the rain in Oregon? You don’t have to be a data geek to see the huge early boom we had. Our market was premature due to the tax credit. Sellers are stressed who expected this summer to be “prime real estate season” to be dealing with a lack of showings, but we all new things were happening too early.
For every action there is an equal and opposite reaction.
Well our real estate market didn’t realize that we weren’t dealing with physics here, but Sir Issac Newton’s laws of motion certainly apply to our market. Home sales plunged 47% from last year’s July. I told you that we would see a drop in sales a couple of months ago, but it did drop more than I expected. I could feel the slowness of the market, which continues to be slow right now. August’s numbers won’t be stellar, I can tell you that already.
July’s average home price was down 7% from last year’s $204,727 to $190,222. The median shifted downward a mere 2.5% to $183, 750. The biggest concern I see right now in the housing market is that inventory in Salem Oregon proper surged to 18.9 months. This is NOT a good thing. Our distressed property sector is holding fairly steady at 12.3% of the market. This will climb a bit over the next year, I think, but it won’t ever be like the really hard-hit areas of the country.
- So, the distressed property sector is remaining fairly steady.
- Real estate sales are down.
- Home prices are down.
- Inventory is seriously up.
So, what do I think? I’ll get back to you after October. Fall is typically a good real estate season in our city. If things don’t perk up in the market for fall, as is typical, then the massive inventory that we have on the market right now will have no choice but to pummel real estate prices.