What to Make of all of the Real Estate News – by Graham Farran, Expert Properties

Every week, the media offers us a barrage of articles about interest rates, foreclosures and home prices—we are frequently asked what it all means to those of us living in Southern Oregon, Jacksonville and the Applegate. In general, we are in-line with the majority of the housing industry in the United States which has been on an upward trend, but there are exceptions.

Here is a recap of real estate prices, sales and interest rates and how they have affected our local market.

Interest Rates: Life after easy money—The Federal Government has done a great job of creating a cheap supply of money, giving us historically-low interest rates which in-turn has stabilized the economy and improved the housing market. These measures are called “Quantitative easing,” which is a process in which the government buys financial assets to increase the money supply. Our government is currently buying treasury bonds at the rate of $85 billion-a-month to keep our interest rates low. But all good things must end and as the economy improves, we will most likely see interest rates slowly climb or at least level-out. Most analysts doubt that we will see 3%, 30- year mortgages in the near future. As the economy in the United States strengthens and shows moderate growth, the Federal Reserve is rethinking the future course of Federal policy and has suggested that they could pare back on this program later this year. Ben Bernanke, the Federal Reserve Chairman, compared the potential scaling-back to lifting a foot off the gas pedal of a car. So, the economy is improving but interest rates have gone up. At the moment, bankrate.com shows the average fixed 30-year mortgage at 4.37%. While the rising interest rates will cause some potential borrowers to rethink their purchase decisions, savvy buyers will act now to lock in interest rates while still at historic lows.

Foreclosures: Not yet gone—Although we have seen a drastic decrease in the number of bank-owned sales compared to the number of overall home sales, and the number of homes going into default has decreased, the problem is not yet resolved—it simply has been delayed. There are plenty of homes in the Rogue Valley that have been in default for years, commonly known as shadow inventory, which are homes the banks have strategically chosen not to foreclose on because there is no market for them. But with the strengthening market and home prices climbing, banks may move to foreclosure on these homes now and get more of their investment back.

Lending Requirements: Tough & Tougher—The last few years have seen tough lending requirements that include requiring higher credit scores, no discrepancies in credit history, and higher income requirements. The approval process has become grueling and requires endless documentation. Also, with prices increasing, it can be difficult to get a home to appraise. New appraisal processes have not helped. The new processes have decreased the amount appraisers earn and have forced many quality appraisers out of business. With fewer experienced appraisers, appraisers are forced to work in areas they do not know or understand well, causing deals to fail because of lack of quality appraisals or appraisals that are short by just a few thousand dollars. What is frustrating is buyers are getting preapproved only to be denied three weeks into the transaction by the final underwriting process or a low appraisal. For the housing market to fully return to a normal market, we will need to loosen credit, qualification standards and appraisals.

Home Prices: Up, Up, Up—Housing continues to be a bright spot in our economy as Case-Shiller reported that its 20-city home price index rose 12.1 percent year over year in April of this year. The 20-city indices have improved year-over-year for 10 straight quarters, the first time that’s happened since 2006.

On the local scene, much has been published about the almost 17% increase in the median home price in the second quarter this year, but we need to take a closer look at what is really happening. The median price of a home can increase in two ways. Most people think their home value went up 17% in the second quarter and maybe it did, but most likely the increase was caused more by the makeup or type of home sales than by the average home price going up. One can see by the detailed sales numbers below that the market has changed in 2013. The high end or over $500,000 market is back! Home sales over $500,000 have increased dramatically compared to this time last year and that will bring up the median price of all home sales. In Jacksonville, we have seen 15 homes sell over $500,000 compared to only 2 last year. In the Applegate Valley we have seen 10 homes sell over $500,000 compared to only 1 the first half of last year. We still haven’t seen any homes sell for over $1,000,000 in the Applegate or Jacksonville and currently there are 16 listed for sale over the $1,000,000 mark.

Jacksonville Homes Sold & Pending: (Jacksonville and out to Ruch)

______________________2012/First Half*        2013/First Half*
$100,000 – $249,000            14                                15
$250,000 – $499,000            27                               30
$500,000 – $749,000             1                                10
$750,000 – $999,999              1                                 5
Over       $1,000,000             0                                   0

Applegate Home Sales: (Ruch, Murphy, Williams & the Applegate Valley)

_____________________2012/First Half*        2013/First Half*
$100,000 – $249,000            18                              30
$250,000 – $499,000            17                              30
$500,000 – $749,000              1                                8
$750,000 – $999,999              0                                2
Over       $1,000,000               0                                 0

Stats taken from Southern Oregon Multiple Listing Service.

Although our local real estate market has a ways to go before it is fully recovered, we are on the right track. Expert Properties has furnished and unfurnished homes chock-full of families from out of state who have recently sold their home and have moved to our area. They are smart buyers who are taking their time to get to know the area and making sure the job is a fit/stable before they buy. The buyers are here and analyzing their options. We have not seen this kind of in-migration since 2005 and think it’s nice that so many newcomers are finding our area such a beautiful place to make their new home!

Graham Farran is a broker with Expert Properties, located at 620 N. 5th Street in Jacksonville. Please see their ad on the back cover and contact them at 541-899-2030 or online at www.expertprops.com.

Posted July 30, 2013