2007 is shaping up to be the year of reality for Happy Valley. After enjoying a long run of strong growth and appreciation, we are settling into a period of market adjustments and value stagnation.
Median value: While RMLS shows year-over-year a 19.8% value gain, we need to look into this number and the definition of median to determine what is really happening. In HV our median has been rising predominately because of the bigger and more elaborate homes being built and sold by Developers, NOT by re-sale of existing homes. When a large segment of homes sold are new, the median can be carried upward without truly reflecting the re-sale appreciation of existing homes. A better measure would be the re-sale price appreciation for an area.
Market Reality: Your home may not have appreciated as fast as you think it has...
Toxic Mortgages: I have been asking clients recently if they could afford to buy their current home at today's valuation. I have been hearing a lot of no's. Many of the financial tricks people used to get into their home to begin with are backfiring. Banks have dramatically tightened their lending requirements, leaving many homeowners who MUST refinance with no product option. These people are electing to sell their homes. We are seeing a rush to market by investors and toxic mortgage holders who are trying to get out from under their homes before they lose them to foreclosure. In the past three years fully 1/3 of all new loans in the greater HV area had an interest only payment option and are adjustable.
Market reality: Many homeowners are going to try to sell this year, flooding the market with inventory.
New Development: The amount of new construction in HV has been incredible the past three years, and continues today. Problem being, Buyer's who can afford the McMansions have dwindled, leaving builders with a large glut of unsold homes. At this point supply is outpacing demand.
Market reality: Builders are offering huge incentives and cutting prices to move inventory. This makes your used home less attractive and less valuable to potential Buyers.
The Good News: While I expect this year to be challenging as we burn through some excess inventory, the toxic mortgage hang-over and general market malaise. HV is still a very attractive market to many looking to buy in the greater Portland area.
Market Reality: If you price your home correctly (Based on recent SALES comps, not listing prices), market your home appropriately and demonstrate to the Buying market that you are reasonable and a "Qualified Seller" you should be OK. As a Seller you need to be clear that it is now a Buyer's Market. When pricing your home understand that it is not your Realtor, an appraiser or even you that sets the value of your home...its the Buyer!
I encourage your responses.
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