Get Real Estate Blog|Salem Oregon Homes|Relocation Guide

The first quarter came to an end a couple of weeks ago which means we have a bit more data to work with regarding home sales.  I know some of you are armed with tax return checks and wondering if it might be time to dive into the real estate market.  So here’s my opinion…

See my pretty lines?  The closer they are together the better the market is doing in terms of supply and demand.  We call that number inventory.  If they are closer it means that the volume of houses entering the market is closer to the demand of the market.  As you can see the first quarter of this year was pretty much on par with last year.  This is nice to see as we are seeing a decrease in inventory.   This is important for a healthy, normal market. We aren’t there yet, but at least things are starting to bottom out.

The reason buyers are coming out, of course, is the ongoing home price declines. We are at the point for many people where buying a home is equivalent to renting a house.  Renting a house for $1,000-$1100 a month?  We can get you a house for that now.  Low interest rates coupled with huge declines in home prices has made this happen.  Buyers are starting to figure this out and are coming out to consider buying.   The rate of home price decline has slowed down, but the decline is still happening.

A buyer prospect recently asked me what I thought of the current market.  I said if 2009 was a 1, because I’m telling you that year stunk in real estate, then we are at a 3.  We are clawing our way out of the hole, but we are still in it.

Home prices have continued to decline in Keizer, just like Salem.  The question is whether or not I was accurate in my predictions from last year.  I have an ego to maintain, you know.  Last year I predicted a 5% decline in home prices and a flat line in home sales.  So how did I fare?

Well like Salem I underestimated the decline a bit.  The median shifted downward by 7.7, so I missed it by 2.7%.    The average home price declined by 9.2% which isn’t surprising as fewer high end homes are selling to keep the average up.  With smaller data figures like this, the median is a better way to look at the data.   So off by a bit, but pretty close.

How did I do on home sales?  Oh…so close.  Check out this lovely graph.  2 more sales in 2011 over 2010.  It doesn’t get much better than that for flat lining.   Keizer home sales have been stalled at these levels for three years, and quite frankly it will probably be like this again in 2012.

So what do all my lovely charts mean to you?  The good news is that banks are still having trouble foreclosing on MERS involved properties so the inventory is at 9.7 months which is decent for these economic times.  This means not great conditions for sellers but better. Multiple offers are happening on occasion, not the norm by any means, but they are happening.  Less competition is good for our regular sellers.

This stagnation for buyers means that sellers are still feeling the pain a bit and many have accepted current market conditions.  Buyers are having better choices in the regular real estate market without having to delve into the distressed property market which means good things for buyer paid closing costs and needed repairs.

So my predictions for next year?.  Honestly, the exact same thing. I think the market will continue to decline another 5% of so and home sales will remain flat lined.  There just aren’t enough buyers that qualify for financing to have any kind of big pop in home buying.

Phew…my ego is still intact.   I know you were all deeply worried about that part.

Data in these charts was crunched from data collected from the WVMLS for single family non-acreage properties.

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 artifically 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?  Ithink 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.