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Oh no, you took the bait! Yet another thread hijacked by Tom Lane to argue endlessly against Smart Growth.
I am big fan of Oregon-style urban planning, and therefore an easy prey. Fortunately, Mr. Lane's arguments are such nonsense, they almost don't need a rebuttal. I'll be on my guard next time.
Like it or not, there will always be upward pressure on housing prices here, as it is in all other unique and nature based communities around the Country where quality of life is very high. Regardless of economic conditions, social policy or employment availability, Eugene will always be a highly popular place to live for people on all levels of the economic ladder. I for one, evaluated housing in all parts of the Country before choosing Eugene. As I evaluated Eugene properties over the past nine months, I noticed that the top 20 percent of all properties I evaluated, based on location, condition, amenities and price, sold within a reasonable time, no matter the economic conditions and normalizing statistics. Unless we embrace some socialistic form of Government that limits the right of property owners to maximize return on real property to the degree free markets allow, Eugene will remain on the higher side of housing affordability.
Like it or not, there will always be upward pressure on housing prices here, as it is in all other unique and nature based communities around the Country where quality of life is very high. Regardless of economic conditions, social policy or employment availability, Eugene will always be a highly popular place to live for people on all levels of the economic ladder. I for one, evaluated housing in all parts of the Country before choosing Eugene. As I evaluated Eugene properties over the past nine months, I noticed that the top 20 percent of all properties I evaluated, based on location, condition, amenities and price, sold within a reasonable time, no matter the economic conditions and normalizing statistics. Unless we embrace some socialistic form of Government that limits the right of property owners to maximize return on real property to the degree free markets allow, Eugene will remain on the higher side of housing affordability.
Like it or not, there will always be upward pressure on housing prices here, as it is in all other unique and nature based communities around the Country where quality of life is very high. Regardless of economic conditions, social policy or employment availability, Eugene will always be a highly popular place to live for people on all levels of the economic ladder. I for one, evaluated housing in all parts of the Country before choosing Eugene. As I evaluated Eugene properties over the past nine months, I noticed that the top 20 percent of all properties I evaluated, based on location, condition, amenities and price, sold within a reasonable time, no matter the economic conditions and normalizing statistics. Unless we embrace some socialistic form of Government that limits the right of property owners to maximize return on real property to the degree free markets allow, Eugene will remain on the higher side of housing affordability.
I think you comments have some validity. Obviously, I live in Eugene because I consider it to be a desirable place to live. Conincidentally, years ago when I lived in South Florida, I heard a lot of people saying the same things about SoFla real estate never going down because it is a tropical paradise and such a great place to live. The RE crash there has been truly spectacular.
Consider residential RE prices in Eugene and Oregon in general in relation to the national median over the last ten years:
It seems like until 2006 or so prices in Eugene have been in line with the national median. Perhaps the current divergence has something to do with Eugene being one of the most overpriced markets in the country? Prices in Eugene have been helped by a number of factors as indicated in my previous post in this topic, and virtually none of those factors will be present going forward.
[Mod edit - 10 post needed to link off site] estimates that Eugene is #8 most overpriced US market out of 330 metropolitan statistical areas. Will Eugene be able to sustain this dubious distinction in the face of 12% unemployment (more like 20% is you look at U-6 rather than U-3), lack of new jobs, lack of population growth, first-time homebuyer credit expiring, and shadow inventory about to hit the market? I guess we'll just have to wait and see. The monthly RMLS reports indicate that prices in Eugene continue to fall despite all the hoopla about reduced months of inventory and increased sales.
Last edited by Oildog; 10-28-2009 at 06:20 AM..
Reason: 10 post needed to link
Seems like you are really hoping that prices will drop so that you can buy something cheap. Personally, I doubt it. I think your statistics are not correct because you are using a traditional model of a closed economy.
Firstly, I should remind you that the unemployment rate in Eugene has always been high. Higher recently, but still, it is usually fairly high.
Secondly, I think that the majority of those being laid off are not typically homeowners (exceptions exist of course). Of those people in the "high risk of lay off "category that also own homes, they tend to own the lower cost homes in certain small sections of Eugene (exceptions exist of course). On the other hand, the south side of Eugene has the higher cost homes, and these are already recovering their small price decrease in 2008. In other words, even Eugene can be divided into two separate real estate markets. One may be performing as you say, but the other is certainly not. (If you are interested in buying one of the lower costs houses in Eugene, around $200K, then you probably are right that these house will continue to feel downward pressure until their target buyers feel more confidence in their job security).
In the case of Eugene, a large percentage of the housing price increase over the years has been due to people moving in from other areas. For them, especially those from California, prices in Eugene are still VERY cheap. Compared to southern CA, prices in Eugene are around 1/4 of the price for a similar quality house in a similar quality area. That's crazy cheap!
Not sure why you say the population in Eugene is shrinking slightly. That just doesn't match my own first-hand knowledge of strong continued migration into the area from other states (especially CA). Perhaps the statistics are showing the net population effect with some people moving out (people who lost their jobs and many renters) and other people moving in to buy low cost houses? Alternatively, maybe some of the people moving into Eugene are maintaining their residence status in their former state? Just a guess.
Thank you for the detailed response! I am relatively new to the community, so I really appreciate your thoughts and reflections.
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Originally Posted by Mr Eugenified
Seems like you are really hoping that prices will drop so that you can buy something cheap.
I am not hoping to buy something cheap. However, I do not see a point of buying a house for $400K is you can rent the same house for $1,500 a month (fairly common ratio in South Eugene). You pay more in PITI than in rent with a 20% downpayment, get to eat the depreciation, have to pay for all repairs/appliances, have less flexibility if you have to move, etc. What would be the benefits of owning? Note that price-to-rent ratios were completely different in Eugene prior to 2005-06.
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I think your statistics are not correct because you are using a traditional model of a closed economy.
I am not sure what you meant by this. BTW, I do not have any data sets of my own, just the data I get from RMLS, S&P CSI, Zillow, IHS Global Insight, Trulia, etc. I do try to use multiple data sources whenever possible to reduce the risk of error.
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Firstly, I should remind you that the unemployment rate in Eugene has always been high. Higher recently, but still, it is usually fairly high.
Incorrect. Based on the BLS data, in 1990-1999, the unemployment rate in Eugene was 0.3% lower than the national average (the average difference for those years). In 2000-2008 (the most recent year for which data are available), it was 0.9% higher than the national average. Yet, today it is fully 3% higher. This is a significant divergence from the historical trend.
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Secondly, I think that the majority of those being laid off are not typically homeowners (exceptions exist of course). Of those people in the "high risk of lay off "category that also own homes, they tend to own the lower cost homes in certain small sections of Eugene (exceptions exist of course).
I personally know several local homeowners who have been laid off, but I am not aware of the statistics that breaks down unemployed by their homeownership status. Any links or data references would be greatly appreciated.
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On the other hand, the south side of Eugene has the higher cost homes, and these are already recovering their small price decrease in 2008.
The monthly RMLS reports indicate that prices in South Eugene continue to fall. The most recent report I have seen was for September of this year, and both median and average prices went down on YOY and month-to-month basis. I will concede that RMLS reports are not entirely accurate, because there is a different mix of houses being sold from month to month, so you have to look at other indicators as well. However, the overall trend is pretty clear.
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In the case of Eugene, a large percentage of the housing price increase over the years has been due to people moving in from other areas. For them, especially those from California, prices in Eugene are still VERY cheap. Compared to southern CA, prices in Eugene are around 1/4 of the price for a similar quality house in a similar quality area. That's crazy cheap!
I agree that this was one of the major factors affecting prices in the past. I do not see this as much of a factor going forward, since a very large percentage of CA homeowners are now under water on their residences and not in a position to move their accumulated equity north. Also, the difference in prices have gone down significantly as CA prices crashed. And besides health care, there is no job growth in Eugene right now.
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Not sure why you say the population in Eugene is shrinking slightly. That just doesn't match my own first-hand knowledge of strong continued migration into the area from other states (especially CA).
I did not say that the population is shrinking, I said there is a "lack of population growth". According to the Portland State University's Population Research Center, Eugene's population has been growing by about 1% per year for many years. In 2008, the growth slowed to about 0.5%. The final 2009 numbers will not be out until next year, but the growth is likely to be less than 0.5%, probably around zero. Historically, all MSA's with unemployment rates significantly higher than the national average have experienced slower population growth; I don't see why Eugene would be any different.
However, I do not see a point of buying a house for $400K is you can rent the same house for $1,500 a month (fairly common ratio in South Eugene). You pay more in PITI than in rent with a 20% downpayment, get to eat the depreciation, have to pay for all repairs/appliances, have less flexibility if you have to move, etc. What would be the benefits of owning?
Well, maybe your numbers are slightly off...I think a $400K house would rent for more than $1500...probably more like $1800 or slightly more. The house I rented previously in Eugene was worth about $260K and we paid $1350 monthly rent. But anyways, I am just nitpicking. As you correctly state, it still is more expensive to own than to rent. The benefits of owning that you are overlooking are:
-freedom to do what you want with the house/deco,
-ability to make long term plans (no one year leases),
-pride in ownership,
-and the chance to make money if the house appreciates over time.
Those are some very big factors in my book.
I should also mention that the neighborhoods with high ownership ratios tend to be much more stable and friendly that the "renter" neighborhoods. Just my personal impression, but I have found this to be true just about anywhere, not only in Eugene.
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Originally Posted by Olduvai2020
The monthly RMLS reports indicate that prices in South Eugene continue to fall. The most recent report I have seen was for September of this year, and both median and average prices went down on YOY and month-to-month basis.
In my experience, the data set for South Eugene is too small to watch these figures on a monthly or even yearly basis (the results get screwed up if an abnormal number of low price or high price homes are sold in one month or even in one year). I would suggest you define a target type of house (you can define this pretty clearly in the search function of one of those real estate sites). Try to do it as narrowly/specifically as you can. Then run a search for sold houses of this type over period X. Then look at them one by one to try to see if you can really see clear price differences over time. It will be tough since "sold" properties don't usually have a bunch of pictures on the internet site, so it is difficult to compare the features of the houses that could hugely effect the price. (But anyways, maybe a realtor could also give you a link into the RMLS system with full picture sets for each sold house).
This approach is definitely a lot different from your statistical approach, but I think it may give you a more clear picture.
One more subjective point to throw into the mix: As realtors tend to point out, the good homes have solid prices and sell quickly no matter what the statistics say. Usually I discount 98% of everything that comes out of a realtor's mouth, but in this case, I have to agree with them. The point being, if there are 50 houses on the market, and 45 of them are sorta crappy beat-up 60's homes with owners who are retiring and have not taken much care of their home for 20 years (or they just got used to looking at the "status quo" and did not realize how run down it had gotten)...then those 45 homes may drop in price but the other 5 will remain quite solid. If you are someone like me who wants one of those 5, then the statistics may be misleading.
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Originally Posted by Olduvai2020
I did not say that the population is shrinking, I said there is a "lack of population growth". According to the Portland State University's Population Research Center, Eugene's population has been growing by about 1% per year for many years. In 2008, the growth slowed to about 0.5%. The final 2009 numbers will not be out until next year, but the growth is likely to be less than 0.5%, probably around zero.
I am curious if that figure is "net", e.g. if 10,000 people moved in and 10,000 other people left, would the statistics show a lack of population growth?
I am big fan of Oregon-style urban planning, and therefore an easy prey. Fortunately, Mr. Lane's arguments are such nonsense, they almost don't need a rebuttal. I'll be on my guard next time.
Many thanks for the Zillow link ! There are other alternatives to urban planning besides the smart growth model in Oregon, and I will not elaborate here from a political standpoint. I am comparing and contrasting different areas to evaluate my options. However I would ask you to reconsider calling my presentation "nonsense." Look at South Lake Tahoe, CA, for example, where there are large lot sizes. There is very low density, with large lot sizes and a low volume of traffic, and no need for additional freeways (that you suggest would be required in Eugene). And, there are large tracts of open space. It's a very nice town, and people fall in love with it, as they do with other small towns of low density such as Flagstaff, AZ; Sedona, AZ; Durango, CO: and Santa Fe, NM . . .
As for house prices in Eugene, I have looked at the market, however, prices are overpriced as you have pointed out in detail in your other posts. If I ever moved there, I would only be able to rent, and would have to buy a home after many years, or, outside the incorporated areas. Eugene contrasts with less expensive markets with immediate ownership potential, such as Durango-Bayfield, CO (La Plata, County); Salida, CO; Alamosa, CO; Longmont-Lyons, CO; Ft. Collins, CO; etc . . .
The same graph you have above for Eugene is below for Denver, Boulder, and Ft. Collins. As you can see, there is not much of a housing bubble, and the average home price is $210K with Ft. Collins and Boulder starting to recover . . .
Well, maybe your numbers are slightly off...I think a $400K house would rent for more than $1500...probably more like $1800 or slightly more. The house I rented previously in Eugene was worth about $260K and we paid $1350 monthly rent.
Well, as I said, price-to-rent ratios in Eugene have changed quite a bit over time. Right now, it's kind of a deflationary race to the bottom with rents falling even faster than prices this summer, especially with all the government efforts to prop up the prices with the first-time homebuyer tax credit, Fed purchasing 100% of all MBS to keep the rates at record low levels, and the supply of foreclosures artificially constricted by HAMP and other loan mod/foreclosure prevention efforts. Note, BTW, that all of these factors will eventually go away, some sooner than others.
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The benefits of owning that you are overlooking are:
-freedom to do what you want with the house/deco,
-ability to make long term plans (no one year leases),
-pride in ownership,
-and the chance to make money if the house appreciates over time.
Those are some very big factors in my book.
I think all of these advantages are very real (except for the pride of ownership, which is a purely emotional factor), and they are some of the reasons why it makes sense to own rather than to rent most of the time. Some people are willing to pay more for these advantages than others. For me, the risk of continued depreciation outweighs all of these factors at the moment; I would prefer to miss the bottom and buy on the upswing after the prices are stabilized.
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I should also mention that the neighborhoods with high ownership ratios tend to be much more stable and friendly that the "renter" neighborhoods. Just my personal impression, but I have found this to be true just about anywhere, not only in Eugene.
Agreed. I suspected this is more a function of income and demographics, however, rather than homeownership status. Back on the east coast, I've seen some bad neighborhoods with virtually no rentals and close to 100% ownership rate.
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In my experience, the data set for South Eugene is too small to watch these figures on a monthly or even yearly basis (the results get screwed up if an abnormal number of low price or high price homes are sold in one month or even in one year). I would suggest you define a target type of house (you can define this pretty clearly in the search function of one of those real estate sites).
That's pretty much the approach I've been using. In the price range I am looking at ($300K-$400K), most houses sit on the market for many months with no offers, and when they do sell, they sell at steep discounts to the asking price. There is a lot of activity in the under $250K sector, but I have not seen a single house that I would want to buy in that price range (either not the right neighborhood for me and my family, or the house is a piece of crap, as you noted).
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I am curious if that figure is "net", e.g. if 10,000 people moved in and 10,000 other people left, would the statistics show a lack of population growth?
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Fortunately, Mr. Lane's arguments are such nonsense, they almost don't need a rebuttal. I'll be on my guard next time.
Personally, I doubt it. I think your statistics are not correct because you are using a traditional model of a closed economy. 
Eugene Oregon House Prices
