For the last 18 months my belief has been we will see default and foreclosures rates mirror those in other parts of the country. Our only defense could very well be that we did not have the massive annual appreciations other markets around us experienced. But that is no guarantee that our coming depreciation rates will be any less than other markets. A "market correction's" behavior is not dependent on the market's run up profile.
For some there has been a sense of denial that what is happening everywhere else in the country, or even the state, could not possibly happen here. Statements like; "our job base is more stable", "home buyers in our market are more educated", "it is a more desirable place to live", etc., are still being used as if they were a vaccination against the potentially viral market down turn seen in nearly every market in the US.
Here is a chart from Tom Potiowski, State of Oregon Economist.
All around Oregon, we have seen what is occurring in the rest of the country. Portland, Salem, Medford, and especially Bend; have all experienced downward price trends and the associated rise in mortgage defaults and foreclosures. Albany and Lebanon are not immune, and, Eugene and Springfield are in the club as well. What makes some think it won't happen here in Corvallis? In reality it has already been happening. So far, depreciation has been smaller than other markets. But it's happening and the facts suggest that it will get worse before it gets better.
All the data shows that the peak in price appreciations in California occurred in the middle of 2004. California's rate of depreciation just bottomed out ( a false bottom? ) in early 2009. A 4 1/2 year cycle. Oregon as a whole didn't have that same peak until late 2006. That means we potentially have another 2 years to go, yikes!
Here's why I think we have yet to see the bottom. 1) job losses across all industries in the area continue to mount, 2) one of the largest employers in our area continues to lay off or transfer employees out of the area, 3) the over blown belief that it is impossible to get a loan to buy a home, and , 4) that pesky issue of shadow inventory of un listed homes owned by banks, Fannie Mae and Freddie Mac. For the record, #3 is just not true. It's called qualifying for a payment that you can afford.
Who should be buying in this market? Probably not cash buyers. We will see these folks sit on the sidelines for a bit longer. There might be blood in the water but not enough for them yet. But those thinking of buying in the next year that will be borrowing money shouldn't wait much longer. Mortgage rates are as low as they are going to get despite what an Internet site or an unscrupulous broker may tell you. The fact is the impending increase in rates will more than wipe out any additional declines in values by several factors. And that discussion is for a different post.
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