11.11.16

Looking Ahead

First off, everyone relax.  Take a few days to go through the 5 stages of grief, and don't do anything stupid that will stick with you for the rest of your life.





As a follow up to the election, the Michael Moore scenario played out.  As shown in the previous post, I was concerned that Michigan would go red, and it did.  Surprisingly, Wisconsin did too, and less surprisingly, Pennsylvania.  I got the rest of the states right.  I gave team (R) a 33.33% chance of winning.  So, the results are not shocking to me.  I managed my expectations accordingly prior to the election day.  I think a lot of people were assuming >99% odds team (D) would win, and that's probably the primary reason people are in shock and denial.  This was probably due to a combination of overconfidence by team (D) and the media proclaiming a winner prior to the finish line.  Overall, my outlook themes from over a year ago were mostly right... the apathy, the eroding coalition, and the Echo Boom.

There are a lot of opinions out there.  Here are a few more.  People vote for all kinds of reasons.  For some, it's a single issue, for others it's a collection of issues.  Some vote with their emotions and others with their head.  Sometimes, people vote without knowing what or who they are voting for.  Long story short, do not generalize or demonize the voters of team (D), team (R), team (I), or team (None).  With that out of the way, why do I think team (R) won the electoral vote?  On a high level, I think team (D) pushed too far left over the last few years, and unfortunately they left behind part of their coalition, which ended up being the Mid-West.  Do not demonize these voters, their vote was economic.  The recovery has been good for the east and west coasts (team D) with the rising stock market, housing market, and job market.  The recovery wasn't robust enough in the Mid-West, and with an underperforming jobs market there, the perceived cost pressures from regulations were unbearable.  The perception was higher health care cost (ACA), high energy prices (CPP & GHG pricing), and higher taxes/fees.  Then you had the team (R) promising to review/renegotiate trade deals and tariffs to help the people of the region, even at the expense of the rest of the country.  It was a winning message, and they voted for their own interest.

It remains to be seen if team (R) can deliver on their promises.  A warning to team (D), if team (R) can deliver, then team (R) will likely win in 2020 and maybe even 2024, because they will have the loyalty of the Mid-West voters, and it will be enough to outweigh the changing electoral map.  It won't matter if North Carolina, Florida, Georgia, and Arizona become more purple to blue.

So, what's next for team (D)?  The coalition needs to be patched up.  Don't push too far too quickly.  Make changes, but at a slower pace, or else people will revolt.  We are now seeing a reversion to the mean, which is to be expected.  The old, 2 steps forward, 1 step back.  I just hope we don't over correct and take 2 or 3 steps back.  Also, team (D) needs to not be smug and high n' mighty.  And don't be that person... a combination of someone who just made a New Year's resolution, and a creepy cultist going door to door with pamphlets with a fake nice smile.  Just be yourself.

Last point.  The media has us all worked up and scared that the world is ending.  I guess it's a possibility, but until there is actual evidence, give optimism the benefit of the doubt.  Don't say or do something stupid to ruin your life.  Be willing to find common ground, find positive causes to promote, and hope for the best for the country, regardless of if your team won or lost.

I'll be reviewing the housing market again soon.  My previous outlook from over a year ago was looking at 2016 as a good year to sell, 2017 could be the stall out, and 2018 might have weakness to downside risk.  This is was due to the election uncertainty, the potential downside risk to falling stock market and rising interest rates, and the realization that a recession is probable over the next few years (using historical data).


7.11.16

From July 2015 to Now

Back in July 2015, I had a blog post with some random thoughts on the 2016 election.  At that time, I didn't try and guess who the (R) and (D) nominees would be.  How did my random thoughts from that blog post play out, compared to the current outlook on the eve of the election?  And then, what's my best guess for what's going to happen tomorrow.

First off, the map.  You'll notice a lot of blank states.  No, I don't think all the blank states are competitive, but, these are the states where team (R) or team (D) could point to at least one poll (even if it's an outlier), and say that there's a chance to win it.


Click the map to create your own at 270toWin.com




Next, here is my map of the "Battleground states".  I think Georgia and Arizona could be very close, but it will likely stay (R)... for this election at least.


Click the map to create your own at 270toWin.com


In my July 2015 blog post, I guessed the following would happen.  1).  Low enthusiasm (apathy)... I guessed that the candidates would represent the past and not the future, and young voters wouldn't turn out like they did in 2008 and 2012.  2).  The team (D) coalition might not match the Obama coalition... Obama is very likable and is a great campaigner.  His performance in 2008 and 2012 would likely not be matched in 2016.  Team (D) might not get the same voters showing up on election day.  3).  The "Echo Boom", I guessed that due to the Millennials growing up, they could grow more fiscally conservative, but remain socially liberal.  Given the right team (R) candidate, the Millennials might swing away from team (D).

I think I was somewhat right on issue 1.  I think there was a poll done recently that 8 out of 10 likely voters are repulsed by this election.  A negative election might dampen voter turnout.  However, the anti-team (R) vote might motivate the voters.  Also, there could be extra motivation to elect the first female president.  I think I'm somewhat right on issue 2.  The team (D) is no Obama, so I'd expect a slightly worse performance for team (D) this year.  However, given team (R), this might be offset.  I think I'm wrong on issue 3, given team (R).  However, Millennials might have more apathy in this election, or vote for a 3rd party.

Also, I didn't expect team (R) to appeal to blue collar voters this year, (stronger performance in Iowa and Ohio).  I had expected a moderate team (R) that would appeal to minorities... I was wrong about that (weaker performance in SW).  Team (D) locked up Virginia with the vice president pick, and the fact team (R) doesn't appeal to the northern part of the state next to DC.  So, I got some general themes right, and some wrong.

My prediction:  
I think team (D) will pick up Nevada in a close race.  I think Colorado will go to team (D).  I think Iowa will barely go team (R).  I think Ohio will barely go to team (R), very close.  I think New Hampshire will go to team (D).  I think North Carolina will barely go to team (R), very close.  I think Pennsylvania will go to team (D).  You'll notice that Michigan, Florida, and the 1 electoral vote from Maine district are blank.  Given my prediction above, Maine won't make a difference, unless I'm wrong about Colorado, or Nevada and New Hampshire.  Florida is a must win for team (R).  I think Florida will be very, very close.  Michigan should go for team (D), but I have to be honest, there's a small probability that Michael Moore is right, and blue collar voters will go for team (R), and minority voters either don't vote or swing towards team (R).  


Click the map to create your own at 270toWin.com



The map below is my final prediction.  I think team (D) wins Michigan.  Overall, I'd give a 33.34% probability of a team (D) landslide win, a 33.33% probability of a somewhat close team (D) win, a 30% probability of a very, very narrow team (R) win, and a 3.33% probability of a team (R) win > 280.  This map looks fairly similar to FiveThirtyEight, except North Carolina and Florida are red on my map.  North Carolina and Florida could very easily go to team (D), for an extra 44 electoral votes, for a total of 322... but my gut tells me that since team (R) won North Carolina in 2012 by ~2%, it will stay red, due to a weaker team (D) candidate (not Obama); however, this weakness is offset by a weak team (R)... so team (R) barely wins it in a very close race.  As for Florida... Florida is Florida.  Florida was blue in 2012 ~1%, but again, for the same reasons listed above for North Carolina, I think the state will be very, very close, similar to 2000.



Click the map to create your own at 270toWin.com



My closing thoughts, 66.67% odds for team (D) is fairly good.  Team (D) can be confident, but in the back of my mind, I wonder if polling error will be higher this year due to the undecided voters and 3rd party votes, and which way will the polling error go?  And finally, the most common path for team (R) is likely Nevada and New Hampshire, as shown below.  If you aren't one of the 8/10 people that are repulsed by the election... well, enjoy tomorrow, and may the team you root for win!  :)



Click the map to create your own at 270toWin.com

12.10.15

Fall 2015!

It's been awhile since I've looked at the market.  I thought I'd take a moment to look back at the previous three posts, "Spring 2014", "November 2013", and "May 2013".  It's been about 18 months since my last update.  The common theme of at the end of each post was that we would be in a bull market through at least 2016, and then the market environment could become challenging late 2016 and into 2017, coinciding with a presidential election.  I assumed that the 10% yoy gains in 2013 would ease to about 5% yoy gains, or slightly below, as we moved into 2014 and into 2015.  This was based on the following assumptions:  1. the market (prices) had already absorbed the low interest rate environment, and it was likely that rates would be flat-to-slightly-up due to an improving economy; 2. Inventory would begin to increase as prices increase back to the previous highs in 2007 (price has memory); 3. Demand would be trickle in at a stable rate after feeding off pent-up demand in 2012 and 2013, due to first time home buyers and people who were forced out of the market in 2007-2009, and it takes about 7 years to repair your credit history.

So... what's happened over the last 18 months?  As I've said in the past, a great resource for data is Seattle Bubble, the link goes to a post in Sep 2015 that analyzes the Case-Shiller data as of July 2015.  Looking at the graphs, and using the National-US series, the 10% yoy gains ended in spring of 2014, and remained just below 5% yoy gains since then.  Of course, I'm interested in Portland, so looking at the Portland series, the 10% yoy gains ended in spring of 2014 as well, but only got as low as 6.1% before moving up to the recent 8.5% yoy gain.  Looking at the historical price data graph, the Portland series is just shy of the previous high in 2007.  My outlook was more or less correct on a national level, but the Portland market is outperforming.  In my previous posts, I was wanting to see 2% yoy gains for a few years to add some stability.  We haven't seen that yet... will we in the near future?

Let's take a look at the usual data.

1.  RMLS Market Action Report, Portland Oregon, August 2015:

Median Prices:
Aug 2015:  $316,500
Aug 2014:  $295,900
Yoy Change:  +$20,600; +7%
Note:  The median price is above the previous high of 2007.

Inventory:

Aug 2015:  1.9 months (recent low of 1.6 in Jun 2015)
Aug 2014:  3.0 months
Note:  Extremely low inventory.


2.  Zillow:  

The recent Portland estimate is around $337,000, and is above the previous estimate high of 2007.  The forecast over the next year looks to be increasing prices.


3.  Housing Tracker:  Stopped publishing data in August 2014.  


4.  Unemployment and Interest Rates:  5.5% unemployment rate.  The economy continues to improve.  The 30-year mortgage rate is slightly under 4%, which is lower than 2014 rates.  This is more or less flat over the the last two years since June 2013, maybe there is a bit of a downward projection.  

Portland has continued to see strong demand due to an improving job market, and people moving here from all over.  Supply hasn't really kept up with the demand, hence the inventory is very low.  There has been some large scale apartments/condos that have been added recently, but antidotally, I haven't seen a lot of single family homes built.  When there has been construction of new single family homes, they are usually quite large and expensive.  The remaining supply can be bid up quite high with leverage (low rates) or cash (liquidating equities).   All these factors have led to rents soaring in Portland.  Eventually, supply will increase to accommodate the demand, but I do wonder what the supply will ultimately look like.  There could be a bunch of really small apartments/condos, 300-600 square feet, and then some expensive large houses.  I wonder how much middle range homes/condos will be built? 


Going Forward?
I still think that we will have a bull market through 2016, which will probably be a good year to sell, and then to move to cheaper market.  I could see some retirees do this, only if they can buy or rent in a location for a lot cheaper.  After that, I continue to think 2017 could be challenging year.  Market prices are slow to change direction, so it might not be until late 2017 or early 2018 where some of the yoy gains might start to flirt with 0% or maybe lower.  Why?  Well, here are some random thoughts.  I think prices have responded to the low interest rate environment, which allowed people to leverage up even higher.  I guess it's not impossible for rates to fall below 3% down towards 2%, but if that happens, something bad is probably occurring in the overall economy, deflation.  If for some reason rates increase towards 5% or 6%, then I think it would be a decent drag on house prices.  The stock market gains over the last 4 years has been helpful for people to build up cash and purchase houses with a high % down, or buy with cash outright.  If the stock market stalls, then it could limit the cash market buyers.  Over the last few years, the combination of people accumulating cash and then leveraging with low interest rates has been a huge support for prices.  I think after 2016, the long-term U.S. budget debate will pop up again.  It will be interesting to see what will improve the long-term forecasted budget deficits.  A bigger economy?  Higher taxes?  Lower spending?  At some point in the near future, there will likely be another recession.  I won't guess when.  These broad concerns have me thinking 2017-2018 could see house prices in a challenging environment, and could stall out at 0% yoy gains.  However, population continues to grow, and people need a place to live.  

Overall, I'd say the bull market will continue through next year, and then maybe get a small bump in spring 2017, but after that, it might get murky.  




22.7.15

2016 Random Thoughts

Here are some random thoughts on the upcoming 2016 presidential election.  I'll keep it as team (R) and team (D), rather than guessing who will be running head to head.  I think a lot of people are predicting a fairly easy team (D) win for the election cycle, with the scoreboard showing at least 332 (D) versus 206 (R).  They could be right, but I thought I'd walkthrough a few scenarios where the election could end up being close.

The scenario of the 332 (D) versus 206 (R) is based on the assumption that the Obama coalition will solidify once again and show up to vote.  I voted for Obama in 2008 and 2012.  This seems like a reasonable assumption.  However, it's important to remember that Obama was an amazing campaigner, a likable guy, and was inspirational.  I was in my young 20's and was inspired in 2008, and slightly inspired in 2012.  My peers, the "Millennials", also known as the "echo boomers", a sizable demographic, was young and craved something different... "change".

The Democrats are anticipating that the "echo boomers" will show up in 2016 and vote for team (D), along with the next round of young voters.  Seems logical, right?  If true, the score board will most likely be 332 (D) versus 206 (R).  What if the assumption doesn't hold true?  I'll quickly walkthrough a few ideas... some might be good... some might be bad... and some might be missing...  

The echo boomers grew up.  We are a sizable demographic right now.  I look around, and all my peers are now in their 30's... have gotten married, bought a home, had their first kid, and now are on their second kid.  This doesn't mean that our values have changed... but I've noticed my peers are more conservative nowadays... however, not so much on social issues.  If team (D) doesn't have an inspirational candidate that speaks to our generation, then the echo boomers that voted for Obama  might not be inspired to vote, or could even vote for team (R).

The minority vote.  The headlines in 2008 and 2012 was that Obama won the votes of minorities. This was an important part of his coalition.  The main assumption is that this will happen again in 2016.  It could... but again, if the (D) candidate doesn't inspire voters, then there could be less votes, or even some votes to team (R).  The assumption is that team (R) is out of touch on immigration issues, and as a result will lose votes, which would give team (D) an advantage in battleground states like Nevada and Colorado.  Also, the assumption is that team (R) is out of touch on many issues that are important to minorities.  If this assumption is true, then the scoreboard of 332 (D) versus 206 (R) looks reasonable.  However, if the team (D) candidate doesn't connect with voters, and the (R) candidate somehow does, then things could get interesting.

Apathy.  The economy is doing much better than in 2008/2009.  However, there still remains high levels of poverty, stagnant wages, and people think there is a wealth gap.  The stock market is hitting new highs... but does this just expand the wealth gap?  Home prices are back to previous highs... but does this just expand the wealth gap?  Team (D) could blame team (R) for these issues.  It might work... but if it doesn't, then voters might think, "what does it matter?  Team (R) or Team (D), it's all the same outcome".  Again, if the team (D) candidate isn't inspiring and doesn't connect with the voters, then some voters that voted in 2008 and 2012 might not show up in 2016.  What about the new young voters?  Will they show up?


I'll stop and go into potential 2016 electoral map outcomes.

1.  332 (D) - 206 (R):  

In this scenario, team (D) maintains the Obama coalition, and the 2012 map becomes the 2016 map.  Currently, some Democrats probably think that it's possible expand the map and get more than 332 votes.



Map created at 270toWin.com


2A.  247 (D) - 206 (R) ... the battleground states:  

In my opinion, here are the current battleground states.  You might be able to remove a few, or add a few.  It's debatable.  I give New Mexico to team (D).  If team (D) wins Florida, then it's all over.



Map created at 270toWin.com


2B.  251 (D) - 221 (R):

In this scenario, team (D) wins New Hampshire to solidify New England.  However, team (R) wins Colorado and Nevada.  Could this happen?  Many Democrats probably think this scenario is unlikely given the assumptions of the Obama coalition coming out to vote in 2016.  I personally could see Colorado turn red.  Nevada would be more difficult to turn red... but it's not impossible given the right candidate.  So moving along... that leaves 4 battleground states, Iowa, Ohio, Virginia, and Florida. 



Map created at 270toWin.com


2C.  251 (D) - 227 (R):  One down... 3 to go: 

In this scenario, team (R) manages to find a strategy that wins Iowa.  This will be difficult, but it's not impossible when compared to other states.  So, we are left with three states... Ohio, Virginia, and Florida.  At this point, the map reflects a very close race, similar to 2000 and 2004.  This is where things could get interesting.  On election night, after the west coast results has been reported and called, these three states could still be counting votes... and it could continue into the next day.  



Map created at 270toWin.com


2D.  269 (D) - 240 (R):  2 down... 1 to go:

In this scenario, team (D) implements a strategy that wins Ohio to get to 269 electoral votes.  1 vote away from 270!  Also, in this scenario team (R) barely wins Virginia.  Is this possible?  It looks challenging, but I think it's doable.  Given the right candidate, I could realistically see this occurring.  That leaves one state, Florida, 29 votes.



Map created at 270toWin.com


2E.  269 (D) - 269 (R):  Oh no: 

In this scenario, team (R) wins Florida by razor thin margins.  This would be a terrible outcome.  In the event of a tie, the House of Representatives would elect the President (R), and then the Senators would elect the vice-president (R).  It looks like the 2004 map, but team (D) wins New Mexico and Ohio.  Is this map possible?  Yes, but at this moment, it looks very challenging for team R given the changes over the last 12 years.  Are there problems with this map?  I think Democrats would immediately say that Nevada and Iowa should be blue, and that would tip the election to team (D), 281-257.  They might concede Colorado and Virginia... maybe.  



Map created at 270toWin.com


In my opinion, I think this scenario would represent a Bush versus Clinton map.  Why?  Apathy.  I think a lot of voters on both teams would sit out the election due to apathy.  Yes, they are two different individuals, but the last names represent the past, and outside of the possibility of having the first female president, the match up sounds like a snoozer.  Okay, moving onto other scenarios...


3.  266 (D) - 272 (R):  SW Strategy Fails: 

In this scenario, team (R) finds a strategy to win Ohio, Virginia, Florida, and even Iowa.  However, team (R) does poorly in the SW, and team (D) wins Nevada and Colorado.  In this scenario, team (D) loses the election due to losing Iowa.  



Map created at 270toWin.com


4.  272 (D) - 266 (R):  SW Strategy + Iowa: 

Same as the previous scenario, but team (D) holds onto Iowa, and wins.  It should be noted that Iowa could be replaced with Ohio, or Virginia, or Florida, and team (D) would still win.



Map created at 270toWin.com


5.  268 (D) - 270 (R):  SW Strategy + Iowa Fails:  

Same as the previous scenario, but team (R) finds a strategy to win New Hampshire, and barely wins the election.  Hey, it could happen...



Map created at 270toWin.com


6.  270 (D) - 268 (R):  Virginia for the win:  

In this scenario, team (D) wins Virginia and Nevada, and barely holds on to win the election.  



Map created at 270toWin.com


7  271 (D) - 267 (R):  Florida wins it all: 

Even if team (R) runs the map and wins Nevada, New Mexico, Colorado, Iowa, Ohio, Virginia, and New Hampshire... after all that success, if team (D) barely wins Florida... then team (D) wins the election.  Overall, #7 shows that team (D) has the electoral advantage right now, because a simple Florida win is enough.  For team (R) looking at this map, I would think that the only other state that could flip would be Wisconsin.  That seems unlikely.  After that, maybe PA?


Map created at 270toWin.com


26.4.14

Spring!

I'm optimistic about the future.  The most important thing you can do is look forward, and prepare to change.  In my idealistic future, I see the next generation not only learning facts and using technology, but rather learning to teach, and teach others through all forms of media.  We have only seen the beginning of peer to peer education, and if it can be expanded to everyone, we will witness a new renaissance of education and inventions.



"Rocket arrows chart the motion of the stars you see, Paper money on the go (go go), Cartographic lines will mark the place for you and me, And we can change the things we know, Yeah, we can change the things we know... Water mills conduct the rivers to the wider sea, Lovers moving with the flow, Watch the compass mark the broken lines from you to me, See, we can change the things we know, Yeah, we can change the things we know."


Here is the latest data and updates for April 2014.

1. RMLS Market Action Report
2. Zillow market prices and trends
3. Housing Tracker asking prices
4. Unemployment and mortgage rates
5. Random thoughts


1.  RMLS Market Action Report for Portland, OR (as of March 2014).  The report is here:Link

Mar 2014 median price: $277,500
Mar 2013 median price: $250,000
Difference: +$27,500
YoY % difference: 11%

Mar 2014 average price: $328,100
Mar 2013 average price: $299,000
Difference: +$29,100
YoY % difference: 9.7%

The median and average price year over year (yoy) comparison is positive and continues to show strong percentage gains.  At this point, I believe we have seen all of the yoy price gains associated with low interest rates.  As we move into May and June of 2014, the yoy comparisons will be more challenging, and I would expect the yoy percentage gains to fall below 10%.  May 2013 was when the 30-year mortgage rate moved up from the 3.5% range to the 4.5% range.  The yoy price gains that we should see going forward will be due to the continuation of low inventory.  The yoy price gains might get a little bumpy if demand does not pick up this Spring and Summer.  If inventory returns to a normal level this year, the yoy price gains will have to be supported by the improving economy.  If job growth continues, then the market should continue grind higher, although at a slower yoy percent gain (3% to 5%).  Those who were impacted by the last housing downturn, (2007-2009), could start to come back into the market if they've repaired their credit, built up a downpayment, and have interest in owning.  It takes about 7 years to do that, so this demand could show up between 2014-2016.  If demand picks up, then the housing market could continue higher through 2016.  After the low inventory, it all depends on demand.  The report contains many graphs and data tables.


2.  Zillow has published the market prices and trend data as of March 31, 2014:  http://www.zillow.com/portland-or/home-values/

Mar 2014: $296,300
Mar 2013: $263,000
Difference: $33,300
YoY% Difference: 12.7%

It appears that the aggregate Portland might have surpassed the 2007 peak of $294,000 on August 2007.  It appears that the forecast is for a 4.8% yoy increase.


3.  Housing Tracker asking prices are reported at the following website:

Median asking price:  $309,000

Asking prices increased about $35,000 over the last year, up about 12.5% YoY, improvements seen for the 25th, 50th, and 75th percentiles.  Market supply is roughly flat YoY, and is still quite low.


4.  Unemployment and mortgage rates.  The Portland metro area unemployment rate is at 7.0% and the trend is showing improvement.  The 30-year mortgage rate is currently around 4.375%.  Up yoy, but flat or slightly down from last May/June 2013.


4.   Random Thoughts...

Interest rates:  Should stay at this level if the economy and wages stay flat, but rates will increase alongside an improving economy and more importantly, rising wages.  I assume that we have seen the end of the "mortgage rate" impact on house prices. We should see prices moderate sub 10% YoY gains soon, I'd expect June or July 2014 update.

Inventory:  Price has memory.  For those who have been underwater for a long period of time, the break even number is very important.  As prices increase, more and more people will debate listing their house for sale.  This includes people who own two houses and are renting out one of the houses.  So in theory, as prices increase, you should see more inventory come onto the market.  If prices rise too quickly and too far, then inventory could jump and demand could wane.  But for the time being, inventory is still very low, people have refinanced, and so far, people have had little incentive to sell.  Why sell now if you can sell your house for 10% next year?  It appears that a national inventory bottom was last year, but the Portland Oregon area appears to have a double bottom in 2014 as well.  We are currently seeing the "inventory impact" on house prices, and will probably continue to see it through the end of the year.  Once inventory bottoms and starts to increase, we should see prices moderate due to the "inventory impact" more towards 5% or below by the Winter.

Demand:  The market has been feeding off pent up demand.  Eventually this demand will wane.  I'm not sure when this will occur, it could be when the interest rate impact ends, or when the inventory impact ends.  Once both of these impacts end, it will signal that affordability has dropped, and demand can't purchase at higher prices.  Something to keep an eye on.  If lending standards are eased and risky loans are given to a larger segment of potential owners, then there is a risk of another run up on housing prices.  I want to see 1%-2% you price gains over the next three to five years to add some stability to the market.  However, population continues to grow, so people will need a place to live, renting or purchasing.  The concept of renting and purchasing can shift, example, 3 families living under one roof versus one person living under one roof.

Economy:  The Fed continues to taper, eventually diminishing its support.  The budget deficit picture continues to improve in the short term (2014-2016), it will be more challenging in the longer term.  Overall, it appears we will be in a bull market for at least 2 more years.  The outlook is more unclear as we get into 2016 and 2017.  If demand continues through 2016, then 2016 might be a good year to sell, and then take your time to find a place to downsize.



16.11.13

November 2013



Here is the latest data and updates for November 2013.
1. RMLS Market Action Report
2. Zillow market prices and trends
3. Housing Tracker asking prices
4. Unemployment and mortgage rates



1.  RMLS Market Action Report for Portland, OR (as of October 2013).  The report can be found here:  Link

Oct 2013 median price: $270,000
Oct 2012 median price: $243,300
Difference: +$26,700
YoY % difference: 11%

Oct 2013 average price: $314,100
Oct 2012 average price: $284,600
Difference: +$29,500
YoY % difference: 10.4%

The median and average price YoY comparison is positive and continues to show double digit percentage gains.  Low inventory continues.





2.  Zillow has published the market prices and trend data as of Sep 30th, 2013:

Oct 2013: $286,400
Apr 2012: $253,000
Difference: $33,400
YoY% Difference: 13.3%

The aggregate "Portland" market continues to rise closer to peak market prices seen 2006-2007.




3.  Housing Tracker asking prices are reported at the following website:

Median asking price:  $289,700

Asking prices increased about $30,000 over the last year, up about 10-11% increase YoY, improvements seen for the 25th, 50th, and 75th percentiles.  Market supply is roughly flat YoY, and is still quite low.



4.  Unemployment and mortgage rates.  The Portland metro area unemployment rate is at 7.3% and the trend is showing improvement.  Last year was around 7.9%.  The 30-year mortgage rate is currently around 4.35%.  This is up about 1% YoY.


Some Thoughts
Interest rates:  Basically, rates will stay at this level if the economy and wages stay flat, but rates will increase alongside an improving economy and more importantly, rising wages.  I would assume that by late 2013, we should start to see the end of the "mortgage rate" impact on house prices.  The >10% yoy gains are currently reflecting the "mortgage rate" impact.  We should see prices moderate by Winter 2013/2014, sub 10% YoY gains.

Inventory:  Price has memory.  For those who have been underwater for a long period of time, the break even number is very important.  As prices increase, more and more people will debate listing their house for sale.  This includes people who own two houses and are renting out one of the houses.  So in theory, as prices increase, you should see more inventory come onto the market.  If prices rise too quickly and too far, then inventory could jump and demand could wane.  But for the time being, inventory is still low, people have refinanced, and so far, people have had little incentive to sell.  Why sell now if you can sell your house for 10% next year?  If I had to guess, an inventory bottom will be confirmed this year.  We are currently seeing the "inventory impact" on house prices, and will probably continue to see it through next year.  Once inventory bottoms and starts to increase, we should see prices moderate due to the "inventory impact" more towards 5% or below by following Winter 2014/2015.

Demand:  The market has been feeding off pent up demand.  Eventually this demand will wane.  I'm not sure when this will occur, it could be when the interest rate impact ends, or when the inventory impact ends.  Once both of these impacts end, basically, it will signal that affordability has dropped, and demand can't purchase at higher prices.  Something to keep an eye on.  However, population continues to grow, so people will need a place to live, renting or purchasing.  The concept of renting and purchasing can shift, example, 3 families living under one roof versus one person living under one roof.

Economy:  It will be interesting to see how the market and the economy react to the Fed eventually diminishing its support, which could start December, and continue through 2014-2016.  The budget deficit picture continues to improve in the short term (2013-2016), more challenging longer term.  Overall, it appears like we will be in a bull market for at least 2 more years.  The outlook is more unclear as we go into 2016 and early 2017.  Election cycle.  You could see markets react to the uncertainty.  It wouldn't surprise me to see a market dip around that time... but making predictions over 3 years out, even more than 1 year out, is just wild guessing.