How is the market in your corner of Oregon? (Grants Pass: hardwood floors, low income)

[Fiddlehead]

We have a cool website here in Jackson County that summarizes the market values, including inventory,etc.

Residential Real Estate Sales Statistics Provided by Southern Oregon MLS

As a premiere bubble location in Oregon, we've seen five year declines in real estate approaching 50%. Also double digit employment, since so many of the people here build or sell homes to incoming Californians. Ashland was slowest to drop, but now it has fallen 40% too. Seems like we have finally hit bottom, and I am seeing people pick up home.

What about you? Has your areas begun to stabilize or is it still crashing? How does the economy look? I know the state has a number of regional markets and businesses, so it will be interesting to hear how they are doing.

[Silverfall]

When people ask me that, I tell them that on a scale of 1-10 if 2009 was a one, then this year is a 3 so far. Improvement, but a long way to go.

[Larry Caldwell]

People are so weird about real estate. Back before my mortgage was paid off, they used to have a rule of thumb that people could only afford a mortgage about 3x or 3.5x their annual income. According to the Census Bureau, median family income in Oregon is $49,260. By those numbers, median home price should be around $180,000. Of course, low income people will never be able to afford a home, but even if a family brings in $80,000 a year, they should be shopping in the $200,000 range.

Once upon a time, not too long ago, prices reflected this. I bought my place for $159,000 in 1994, well within our price range to pay off a mortgage, which we did. About 2005 we thought about moving closer to my wife's work, from Myrtle Creek to somewhere around Grants Pass. We couldn't find comparable property for under $1,000,000. Several places were not as nice without as much land, and they still wanted over a million bucks for them. We wished them luck and stayed were we are.

In the long run, home ownership is a great inflation shelter. Rental rates went up 10% last year. If that keeps up, someone's rent would double in just 8 years. Even at 5% inflation, their rent would double in 15 years, while the person who locked in a fixed rate mortgage would see their payments remain steady. During the bubble, people were stretching to buy as much house as they could afford, planning to flip it and take a profit. The bigger the leverage the bigger the profit. That didn't work out. With house prices and incomes dropping, a lot of people lost their shorts.

Home ownership is not an investment. The value of a home is as a place to live, and to take the profit from your investment you have to destroy that value. Eventually I will need to move into town, probably to an assisted living facility, unless I am fortunate enough to die first. I'm willing to bet that the sale price of my home will be just about what I paid for it, plus inflation. Meanwhile, I'm a cash owner and have a free place to live as long as I can take care of it.

Home ownership right now is unpopular because so many people bought more house than they could afford instead of less, but the long term advantage of home ownership hasn't changed. I have young newly wed relatives who just bought a nice home at a depressed price and locked in a 30 year fixed rate mortgage at under 4%. Fifteen years from now they are going to look like geniuses.

[Silverfall]

Originally Posted by Larry Caldwell

People are so weird about real estate. Back before my mortgage was paid off, they used to have a rule of thumb that people could only afford a mortgage about 3x or 3.5x their annual income.

This is how it was before the boom. We are back to that rule of thumb now, as it should be. New built homes are much more modest to reflect that rule of thumb. There was a strong sense of entitlement with homes that everyone should be entitled to granite counters, hardwood floors, etc. I actually had this small cottage for sale and had an open house on a Sunday. This is a $145,000 house mind you. A couple walked in and commented on how unfortunate it was that the house didn't have granite counters and cherry cabinets. I almost starting laughing at the absurdity of their expectations. They were totally serious.

[Fiddlehead]

Thanks folks for your perspectives.

Larry, good thing you did not buy into the Rogue Valley in 2005! Also that price distinction from the Umpqua to the Rogue Country shows how heavily we were influenced by the California bubble down here. I am still looking to one day more up from my $200k 900 sf home bought in early 2003. No go. I still cannot find anything nice for under about $350-400k in Ashland, and I am not doing that. I am underwater, so nothing to bring to the table anyway. Funny, I could not ever move up because the more expensive houses were rising too fast, now I have no down payment and would need to bring cash to closing on a house I bought 9 years ago!

Sheesh, what a crazy decade! It really has created haves and have nots. I am in the latter camp, but at least I have had a good job the whole time and was not hit too hard. Frustrating to have a lost decade though. I will say, I am glad the prices are lower for those starting out. If and when they get back to work, the younger kids should be able buy some nice homes at decent mortgage rates over the next few year, and that will put the market back on more suitable and sustainable footing.

Silverfall, that is a funny story. Some people watch too much Home and Garden TV I guess. Maybe I should install granite counters and cherry cabinets in my old cottage...Oh wait, I'd never get paid back for it!

[Larry Caldwell]

Originally Posted by Silverfall

This is how it was before the boom. We are back to that rule of thumb now, as it should be. New built homes are much more modest to reflect that rule of thumb. There was a strong sense of entitlement with homes that everyone should be entitled to granite counters, hardwood floors, etc. I actually had this small cottage for sale and had an open house on a Sunday. This is a $145,000 house mind you. A couple walked in and commented on how unfortunate it was that the house didn't have granite counters and cherry cabinets. I almost starting laughing at the absurdity of their expectations. They were totally serious.

Granite countertops are available aftermarket. When we remodeled our kitchen, my wife turned thumbs down on granite. She said she thinks granite countertops will be the avocado appliance of the interior decorating fad. We installed Corian instead, except for the kitchen island, which we topped with a big slab of polished marble she happened to have.

Part of the reason my house was so cheap was the interior finish when we bought it. It had dark printing press wood trim, doors, cabinets, and cheap mismatched carpet remnants on the floor, a forced air electric furnace and a shallow well inhabited by a colony of frogs. Structurally the house was great, except the cheapjack contractor neglected to nail off the siding and the roof was starting to leak. We fixed all those defects. The house now has hardwood and tile flooring, I built a new water system, we installed all new doors and cabinets, and moved some walls while we were at it. Thanks to new windows, doors, insulation and a heat pump, our utility bill is less now than it was in 1994, while the house is much more comfortable.

[bluekoi777]

My husband and I are newly weds, and at a very young age bought a home in the santa cruz area. We spent years fixing it up and making it lovely. Unfortunately around '99 my father in law was diagnosed with severe ALS and was given 5 years to live. Being that him and my mother in law lived in the ashland area, it just seemed to be the right thing to do. Pack up our bags and move closer. Anyways, the economy for housing at that time was great! And we sold our house for a ridiculous amount. We found a nice home on the outskirts of ashland with about 5 acres of property and paid what i thought was a reasonable amount, around 400k... The house now has been apraised at nearly half that, lets just say now i owe more than what the damn thing is worth. I dont know whats better, trying to sell and get another cheaper place? Or just sticking with it? This valley is seemingly just going down hill. Maybe its time to move back to Cali!

[Larry Caldwell]

Are you lucky enough to have a US Bank serviced mortgage? They have announced a program to reduce everyone's mortgage to no more than 100% of the appraised value of the home.

I have trouble believing you can pick up 5 acres and a nice house for under $300k anywhere near Ashland, even in today's market.