Oh, happy day – the Dow Jones Industrial Average rose above 10,000 yesterday for the first time in over a year.
Meanwhile, however, we witnessed another milestone that probably means more to the typical Central Oregonian: The median sales price for single-family homes in Bend dropped below $200,000 in September.
According to the monthly report put out by the Bratton Appraisal Group, the median price was $199,000. The last time the median here fell below $200,000 was more than four years ago.
The September median price was 9.5% below the August median and almost 28% below the median in September 2008. It was nearly 50% below the peak of $396,000 reached in May 2007, just before the Great Bend Bubble started to deflate.
What’s especially discouraging is that while Bend prices continue to drop, prices elsewhere in the state and nation seem to be heading back up, or at least leveling off. Here’s the trend line for Portland:
And here’s Salem:
And San Francisco:
And Chicago:
This, of course, is bad news for people in Bend who want (or need) to relocate: While the value of their home is dropping, prices in many other places are rising.
And now the $64 million question: Have we hit bottom yet? I’m no real estate expert, but my answer is yes and no – or more precisely, no and yes.
“No” because the national economy (the Dow notwithstanding) still hasn’t substantially recovered, and the Bend economy is in even worse shape. Besides, there’s still a big inventory of unsold homes on the Bend market. And we’re heading into winter, which normally is the slowest season for home sales anywhere.
“Yes” because I suspect that while it may temporarily dip lower – even a lot lower – the median eventually will bounce back and settle at $200,000 or thereabouts. That’s based on prices in other cities, on history (Bend’s median home price at the start of 2004, before the bubble inflated, was around $220,000) and on the rule of thumb that a reasonable median home price in any community is roughly 4.5 times the median household income in that community. Bend’s estimated median household income as of 2008 was about $41,000.
But when will the bounce-back happen? Ah, if I could answer questions like that I’d be sipping a Mai Tai on my private beach in Fiji right now.
This article appears in Oct 15-21, 2009.
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Tell me about it. We are trying to sell 4 one acres lots here at 20-40,000 below what we could have got 2 years ago, or even 1 year ago possibly. We just want to get out of debt, and out of here.
Hey, maybe one could get those stock brokers, traders, and bankers, to invest here. They are receiving record bonuses this year.
Thanks for the great data, Bruce.
One thing to be aware of though is that median sales price isn’t a perfect number. In any town there are more expensive and less expensive houses. When they sell in the same ratio, the same mix, then the median sales price tells you how they are all doing. In certain times though, the mix might shift. Perhaps in boom times more people will buy at the high end, and perhaps as an economy stalls, more will be forced to sell and move out from the bottom.
The Case-Shiller numbers are nice because they track same-property prices over time. It’s a number crunching challenge for them, and I’m not sure if they do it for Bend, but basically they have to construct an index from homes and only not changes when “their” homes sell.
I believe that nationally the median has fallen further than the Case-Shiller, as a result of the shifting effect. I’m not sure though.
Good points. I know that in Bend houses under $200,000 are selling a lot better than ones over that figure, and houses above $300,000 are hardly selling at all. So the median may well be skewed, as you say.
OTOH, if you can’t sell a $300,000 house for $300,000, is it really worth $300,000?
I wish I had Case-Schiller numbers for Bend, but its index only includes big cities.