The economy is as bad as it has been in any of our lifetimes.  There is a lot of discouraging news.  I’ve been presenting some of it in this post.

If you loose your job, or illness strikes and takes you out of the job market, that’s one thing.  However, if you are healthy and working, you may not be in such bad shape.

Here is a personal story that may be encouraging.

I bought my first house in March of 1980.  I was told that I got the last fixed rate mortgage that would ever be seen on this planet, and that I was very lucky to have gotten it.  It was at 12% interest.

I only heated one room in the house and could barely make the payment.  I was lucky I had a job that was reliable.  So, I hung on.

Over the next eight or nine years, that house was never worth as much as I paid for it.  The house met my needs, but if I wanted to leave I would have had to buy my way out.  That prospect held no appeal, so I stayed there and kept making payments.

When the market is down for some time latent demand builds.  When the market starts rolling along again, it often takes off with some energy.  Eleven years after I bought that house, it sold for 45% more than I paid for it.  That is around a 4% per year increase.  Not bad.  But, it took patience.  I never missed or was late with a payment.

So, if you can hang on, just ignore the current value of your house and live your life.  If you are forced to make a move now, it will likely be tough for you.

But, as they like to say, “They aren’t making any more of it.”  (Real estate that is)  Yet, the population is growing.  The Portland Metro area is anticipated to grow by about a million people in the next 10 to 15 years.  The value of your property will rise.

Good luck.

Ralph Olsen, IFA

Pacific West Appraisal Services, Inc.

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Last week I did two appraisals that showed different aspects of the currently distressed market.

One house is a 1,700 square foot, one story house built in the mid 1990’s.  It is about three miles north east of downtown Vancouver.  It was listed for $260,000.  It received an offer for $250,000.  The offer was accepted.

In the last three months there had not been a house listed by the MLS, similar to the subject and near the subject that had sold for more than $210,000 .

Reviewing the MLS statistics I found that in the February to May 2008 time frame, the average sales price of houses similar to the subject property and near it was about $255,000.  In the May to August time frame the average sale price dropped to about $235,000, or about a 7.5% decrease.  In the August to November time frame the average sale price dropped to about $228,000.  This was about a 3.5% drop.  From the November 2008 to February 2009 time frame the average sales price of houses near and similar to the subject dropped over 19%.

By comparison, I did an appraisal of a larger, two story house, built in the mid 1990’s in Felida.  Filida is about 10 miles north of Vancouver near Salmon Creek.  Looking at the MLS statistics for that product type and location, and following the same time sequence as the property noted above, I found about a 9% drop, then a 6% increase, then a 5.5% increase.  So, over the last year the market moved down and up and generally remained about the same.  I mean to say, it showed no significant value loss over the year.

The whole market has fallen in the last year.  Values and prices are down.  The Bank Owned houses are sold at a discount and on an “as is” basis.  There are lots of Bank Owned houses on the market.  This drags the whole market down.

But, some product types in certain locations are not suffering as much.

Ralph K. Olsen, IFA

Pacific West Appraisal Services, Inc.

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Some relocation companies want market trends analysis based on a 12 month window only.  That is, their market trend analysis is based on a formula that uses the previous 12 months of market activity.  This includes listings, sales and pending sales.

This time frame is useful for market change analysis in a reasonably stable market.  However, in the market we have been experiencing in the last six months, a shorter time frame would be more useful.

I did one of the 12 month formulas last week on a house in central Clark County.  The 12 month formula suggested that the house would experience a marketing time of about .41 months.  The six month analysis I did suggested about a five month supply of competition on the market.  It seems that the subject product type in its location had been stable in the early part of the year, yet had fallen back a lot in the more recent period.

The market is soft and prices are either somewhat stable, or falling significantly.  The subject property of the appraisal mentioned above was purchased four years ago for $510,000.  The market value now is around $350,000 and still falling.

Ralph Olsen, IFA

Pacific West Appraisal Services, Inc.

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I received an e-mail from a homeowner who was frustrated with the current value of their property.  An excerpt from the e-mail was as follows.

“I think that you are perhaps being unethical because you are \’anticipating\’ lower home values into a current appraisal. You should get off you high horse and try harder to get on the customer\’s side, instead of using my appraisal to make a point about the declining house market, and how unscrupulous other guys are. (what about your scrupules)”

I see a lot of this kind of response to the continuously changing market.  While the market was going up, I received no comments.  As it has been going down I’ve found the “shoot the messenger” syndrome quite prevalent.

I say that until the excessive amount of REO flushes out of the market, prices will continue to fall.  The REO is sold “as is” and usually at a discount for quicker sale.  As I have presented in these writings, the level of REO is around four times the normal rate.  Watching the foreclosure statistics will give us some indication of the possible beginning of the recovery from this down market.  I’ll publish those stats again in April.  Let’s hope they show a decline.

Ralph Olsen, IFA

Pacific West Appraisal Services, Inc.

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Popularity: 26% [?]

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