As 2011 winds to a close, most businesses are formulating their 2012 business plans, and that process starts with a look back at the previous 12 months to measure performance and to plot a course for future success. In looking back at the year that was in residential real estate, it wasn’t all doom and gloom in our market.
For starters, we’ve enjoyed historically low interest rates throughout the year, helping to drive the cost of home ownership to its lowest level in years. Fortunately, this condition is expected to continue for most of next year, so the cost to finance a home will remain low for some time. While there have been numerous changes to lending programs (especially when it comes to the qualifications to obtain a mortgage loan), in reality we’ve returned to the traditional underwriting standards that were prevalent in the time period before the real estate bubble began. The loans that are being written today are of very high quality and are expected to perform well over time, minimizing the number of foreclosures that we are likely to see in the future.
When it comes to home values, the rate of depreciation has slowed. Whether or not we’ve hit a bottom is really not known until we look back and view the trend over time, but recent signs indicate that the tide may be turning. For example, at the end of October of this year, the amount of inventory of unsold homes in the Portland area stood at 6.8 months (the length of time it would take at the current pace of sales to exhaust all of the inventory). Compare this to the number of months of inventory at the end of Oct. in 2010, and you’ll see that inventory levels have dropped nearly 4 months. This is increasing the competition for houses as there are fewer properties for buyers to consider. If this trend continues, it will not be surprising to see home prices tick upward.
While we may be hearing negative news in the media about the state of residential real estate, be aware that there are positive signs that a recovery is near in the Oregon market. That would surely make everyone’s business plans for 2012 look a little brighter.
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