National Housing Market: Luxury Homes Sales Soar, Affordable Homes Falter
The volume of homes selling in working and middle-class price ranges is falling dramatically, while at the same time sales of luxury homes are ramping up by very large margins. Mortgage bankers note that new loan applications are on the rise for properties with an asking price of over a half million Dollars whereas the numbers of new loan applications are dropping in every other real estate pricing tier. Nationally, closed transactions of $250,000 or less have sagged by a jawdropping 12 percent when compared to last year, according to Bloomberg.com.
United States Economy Grew by 1.9% Last Year, Portland Real Estate Went Up 12.1%
Median sale prices of residential real estate in Portland, OR rose by 12.1% ($316,400 versus $282,300) whereas the US economy grew by a much smaller margin of 1.9%. Portland, Oregon’s price increases closely mirror home prices which rose 12.9% nationally based on data from the Case Shiller Composite. These steep increases in Portland real estate values don’t seem sustainable given the much smaller and much slower growth of the rest of the economy. And, while increasing prices mean fewer owners are underwater, simply being able to sell your property and pay off the mortgage to get to zero doesn’t mean one’s finances are healed. Also, those who sell their existing homes either need to join the throngs of renters or buy another house at today’s higher prices at the risk of perpetuating the cycle. The economy may be booming for wealthy Americans, but for the middle and working class wages, employment and cost of living are taking their toll on disposable income. With a less robust economy to support itself, some Realtors wonder if today’s housing market will crash faster than it did the last time around.
18% of American Home Owners Still Upside Down On Mortgage: Short Sales Aren’t Over Yet
Far from being fully recovered, the American housing market still has around 18% of home owners underwater on their home mortgages, according to Forbes.com. And, despite all of the encouraging price increases many home owners are left feeling like the economic recovery skipped them. Those home owners now able to sell face the dubious proposition of buying another home at the risk of being caught up again when prices settle in the future. Also a factor is the fact that fewer buyers are able to afford to buy a home at all. Low inventory of homes for sale combined with flagging demand as would-be buyers find they can no longer afford to purchase may prove to be the fly in the housing recovery’s ointment. Rising mortgage interest rates and rising prices which translate into reduced affordability could put a serious damper on increasing property values in the Portland metro area as well as nationally. Also worth asking, is whether 2015 will be the new year of increasing short sales when owners find themselves unable to sell their homes for what they paid?
By Richard Lockwood
Real Estate Broker
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