Real Estate Analysis and Commentary in Rocklin

February 25th, 2019 6:25 AM

No end in sight for the cost battle entry-level home buyers face in Eugene-Springfield

While sales have been swift in a Spring Capital Group subdivision project — on one of the largest developable tracts of lane in or immediately near the Eugene-Springfield urban area — it doesn’t show any signs of easing the growing affordability crunch facing local entry-level home buyers.

Since getting its subdivision plat recorded, the local developer has finalized contracts to sell 122 of its 192 home lots at the far northern edge of the city limits since the lots became available in early December, firm principal Tom Connor Jr. said.

Seven miles south, just outside Eugene’s southern boundary, prominent Creswell developers Norman and Melvin McDougal have been busy clearcutting and building a network of gravel roads through their 500-acre ridgeline property above Lane Community College, with secretive plans for what is believed to be dozens of large, high-end homes, each on multiple acres.

The two development groups bought their properties and entered the land-use process in 2016 and 2017, as Lane County’s housing market was accelerating at record pace.

But storm clouds have been growing over Lane County’s housing market. The city of Eugene last year issued 111 fewer permits for new single-family houses than in 2017. It marked the first time in four years that the number of issued permits declined from the previous year.

Meanwhile, prices continued their torrid rise. The average price of a single-family home sold in the county last year was a record $309,000, according to the Portland-based Regional Multiple Listing Service, up 7.3 percent from 2017. And that year’s average sale price was 9.2 percent higher than 2016.

It adds up to what many real estate agents, homebuilding advocates and economists are calling an imbalance in the local market — an unevenness that’s crowding out many local and first-time buyers and depressing sales activity, with no end in sight.

“Supply is a huge problem, especially in the lower end of the market,” said Kip Lohr, owner and principal broker of Eugene-based Lohr Real Estate. “The difference between 2018 to ’19 and, say, 2017 to ’18 is that we’re seeing the price point for the entry-level homes rise.”

A tightening market hasn’t deterred Spring Capital Group. Construction on the first homes, on the former RiverRidge Golf Complex east of North Delta Highway, could start as soon as next month. But with the very cheapest houses in its north Eugene development expected to run in the mid-$400,000 range, the project is targeting buyers above the typical homebuyer’s means.

“We chose the project and the location because we feel very good about that market in town,” Connor said. “We haven’t seen any slowdown.”

But would-be buyers looking for a house around the county’s $309,000 average price are encountering a completely different market.

“There’s a total structural imbalance, and it’s not easily fixable,” said Kim Heddinger, co-owner and principal broker of Eugene-based Golden Realty.

Lane County has averaged less than two months of housing inventory over the last three years, RMLS data show. That means it would have only taken that long to sell all of the houses for sale in the local market, based on the current sales pace. Most real estate agents consider a healthy market as offering four to six months of inventory, with anything less tilting the scale in favor of sellers and against buyers.

But the inventory varies widely by price point, further highlighting the challenges facing entry-level buyers, Heddinger said.

The county has about six months of housing inventory priced between $500,000 and $800,000, according to data she’s compiled. There’s 16 months of inventory above $800,000.

But for houses between $350,000 and $500,000, there’s just 2.7 months of inventory. Below that, inventory is even less than the 1.9-month average since early 2016.

“There just isn’t enough supply. Everything has gotten so expensive, from the land, to city charges and all of that,” Heddinger said. “It’s still a really good time to buy or sell in certain price ranges. I just don’t know when this is going to change.”

The extended price gains and supply crunch appear to have affected overall sales activity last year. According to RMLS data, 5,203 home sales closed in Lane County last year, excluding the Florence area. That is one fewer than closed in 2017.

By contrast, closed sales rose by 41 more from 2016 to 2017, and by 299 from 2015 to 2016.

The leveling off locally matches a nationwide trend. Home sales in November dropped to a more than seven-year low as rising mortgage interest rates sapped buyers’ purchasing power, according to the National Association of Realtors.

Interest rates have since dipped, sparking some hopes of an upswing in the first half of this year. But urban areas, especially in the western United States, are struggling to control rising home prices as more people migrate there from other parts of the country, said Matthew Gardner, chief economist for Windermere Real Estate.

“I honestly believe we have reached an affordability ceiling,” Gardner said. “That’s not to say there aren’t dirty houses anyone could afford in, say, Ohio, or parts of Michigan. But I expect we’re absolutely going to see across the western United States a slowing down of price growth to allow incomes to start catching up.”

While sales have slowed down locally, the area’s population has continued to rise. Lane County added more than 13,000 residents between mid-2015 and 2017, according to U.S. Census Bureau estimates. That two-year gain was higher than the county’s population growth in the five years prior.

And the University of Oregon’s Phil and Penny Knight Campus for Accelerating Scientific Impact only stands to bring more high-wage jobs to the Eugene area — good for the overall economy, but another possible strain on prices as new residents move to the area for the high-paying jobs, pushing lower-income earners out of the market.

The county’s $309,000 average sale price last year was up from $200,900 in 2012.

“Ultimately, where we have seen prices rise fairly precipitously since 2012, we have to start seeing a softening,” Gardner said. “There must be a relationship between home prices and incomes.”

But many local housing market experts have trouble imagining a leveling off without more of one thing: land for cheap housing.

“There’s not an area where a big subdivision can be built anymore,” said Ed McMahon, executive vice president of the Home Builders Association of Lane County.

The Spring Capital and McDougal projects are developing some of the largest developable tracts in or immediately near the Eugene-Springfield urban area. With those projects targeting affluent buyers, McMahon and others aren’t sure how the region can reverse its growing affordability crunch, without pushing out its urban growth boundary.

That’s a proposal Eugene city officials have largely rejected over years-long discussions about a boundary expansion, arguing the city has enough residential land and should more densely develop what’s already available.

McMahon worries the land crunch — combined with rising labor costs, increasing city charges for infrastructure work and City Council-led talks of a tax on residential construction projects to fund affordable housing units — could sap demand for new construction in Eugene at a time he said it’s sorely needed.

“All the (building) costs are increasing. All the regulation is increasing, and it’s getting to the point where that profit margin isn’t going to be there,” McMahon said. “Builders aren’t going to build if everything keeps going in the same direction.”

Easing the crunch likely will take some government intervention, according to real estate agents like Lohr with Lohr Real Estate. Local and state policymakers could take steps to encourage a greater mixture of low-cost single-family housing, apartments and accessory dwelling units — second, smaller houses built on single-family lots where a home already exists, he said.

But any action figures to help only in the long term, Lohr said. He projects sales and price activity this year will largely mirror 2018, but likely with lower price growth.

“It’s not like you can create land out of thin air,” Lohr said.

As a result, “In the $200,000 to $250,000 price range, what you’re getting for that between 2017 and 2019 are completely different homes,” Lohr explained.

“If you don’t have cash do to a fixer-upper, or don’t want to live in northwest Eugene, you’re going to have a hard time finding a house. Whereas in 2017, there were still a lot of homes where a young couple, somebody who doesn’t know how to swing a hammer, can buy and not spend a bunch of money after purchasing the house. By the end of 2018 there were almost no homes that didn’t need somethi

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Posted by Robert W. Peterson on February 25th, 2019 6:25 AMLeave a Comment

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January 23rd, 2019 6:23 AM

The Bay Area, infamous for high home prices and stiff competition for housing, is unique in California’s housing landscape. Of course, it’s relatively expensive and difficult to be a homebuyer almost anywhere in California, but these complications are multiplied exponentially in the Bay Area, leading to what many have deemed a housing crisis.

But have high home prices and competition finally reached their tipping point? Signs across the Bay Area point to: yes.

The Bay Area’s housing market is cooling in more ways than one, according to a recent Trulia report.

The average days on market has increased across the Bay Area in 2018. This increase has been most significant in the:

  • Napa neighborhoods:
    • Springwood Estates, from 57 days on market in 2017 to 79 days in 2018;
    • Fuller Park, from 66 days on market in 2017 to 83 days in 2018;
    • Westwood, from 44 days on market in 2017 to 55 days in 2018;
  • San Francisco neighborhoods:
    • Russian Hill, from 45 days on market in 2017 to 56 days in 2018;
    • Telegraph Hill, from 46 days on market in 2017 to 57 days in 2018;
  • Richmond neighborhoods:
    • Hilltop Green, from 49 days on market in 2017 to 60 days in 2018;
    • Coronado, from 59 days on market in 2017 to 67 days in 2018; and
  • Mill Valley neighborhood, Cascade Canyon, from 75 days on market in 2017 to 97 days in 2018.

As homes have sat longer on the market, the share of listings receiving a price cut has also increased in cities across the Bay Area, including in the:

  • Richmond neighborhoods:
    • Southwest Annex, from 4.9% of listings in 2017 to 28.0% in 2018;
    • Atchison Village, from 7.7% of listings in 2017 to 19.2% in 2018;
    • Santa Fe, from 1.6% of listings in 2017 to 11.6% in 2018;
  • Napa neighborhoods:
    • Sheveland Ranch, from 6.1% of listings in 2017 to 24.6% in 2018;
    • Shurtleff, from 12.6% of listings in 2017 to 23.8% in 2018;
  • Oakland neighborhoods:
    • Rancho San Antonio, from 2.2% of listings in 2017 to 17.4% in 2018;
    • Toler Heights, from 2.2% of listings in 2017 to 14.7% in 2018; and
  • San Rafael neighborhood, Glenwood, from 4.7% of listings in 2017 to 17.3% in 2018.

Prices to follow next

After nearly seven years of consistently rising home prices and competition for limited inventory, Bay Area homebuyers are finally beginning to see some relief. But for sellers and real estate professionals, a slower market can be problematic.

As homes have begun to sit longer and more price cuts have occurred, home prices are starting to decline. In fact, mid-tier prices in San Francisco have experienced a decline each month since June 2018.

This may be news to our readers, as most media reports choose to focus on annual gains — after all, prices can be volatile on a month-to-month basis, and mid-tier home prices are still 9% above a year earlier in San Francisco due to gains experienced earlier in the year. But first tuesday is confident that the decline in home prices in the latter half of 2018 is only the start of a longer trend.

This forecast is based on three criteria:

  • home sales volume is declining across the state, contributing to longer days on market and more price cuts;
  • mortgage interest rates are increasing, decreasing buyer purchasing power and discouraging homebuyers; and
  • the economic indicator, the yield spread, is quickly approaching zero, indicating an economic recession is imminent 12 months hence, likely in 2020.

What are real estate professionals to do with this information?

Armed with knowledge of a coming slowdown, real estate professionals can prepare today by:

  • increasing marketing efforts to homebuyers, who will have the most to gain in the coming buyer’s market;
  • expanding their skillset by becoming a broker, short sale specialist or property manager to increase their profits;
  • partnering with like-minded individuals to invest in property once the recession takes hold and prices have hit their bottom; and
  • saving their earnings for the rainy days ahead.

Posted by Robert W. Peterson on January 23rd, 2019 6:23 AMLeave a Comment

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January 22nd, 2019 8:44 AM
Peterson Appraisal Group is registered with Dun & Bradstreet

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Posted by Robert W. Peterson on January 22nd, 2019 8:44 AMLeave a Comment

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January 20th, 2019 2:17 PM

5 things is predicting about local real estate in 2019

Nov 28, 2018, 7:00am PST

Trends emerging in the last few months in residential real estate are likely to continue in 2019, according to a forecast from

The online arm of the National Association of Realtors released its official prediction for sales prices and volume Wednesday. Here is more from that and a chat with’s director of economic research, Javier Vivas.

1. Sacramento should see 2.3 percent growth in average sales price in 2019, while the actual number of sales will drop by 1 percent. Nationally the figure is 2.2 percent for price appreciation, while sales will drop by 2 percent.

2. Vivas said Sacramento’s housing market is in a modest deceleration, particularly in sales volume. A lack of affordability both locally and in the Bay Area has pushed many would-be buyers to gear back, with the Bay Area market causing fewer people to sell homes and head east for cheaper options.

3. In addition to affordability, Vivas said, Sacramento isn’t poised to see as much job growth in the future, taking away a reason for people to migrate here. And while millennials are expected to be the main driver in housing in most markets even through the next recession, he said, a slightly older demographic of 35- to 44-year olds is likely to be a bigger sales force locally, he said.

4. A slowdown in growth doesn't mean housing is headed into negative territory, Vivas said. “It’s still very much a seller’s market in many places,” he said. But buyer confidence in the economy overall is actually higher than it is in housing, he added.

5. If buyer sentiment is having a strong effect anywhere, it’s in entry-level homes, where inventory is scarce. Vivas said those buyers have seen prices, and more recently interest rates, rising to levels they can’t afford, leading them to delay buying at all.  

Posted by Robert W. Peterson on January 20th, 2019 2:17 PMLeave a Comment

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January 20th, 2019 1:57 PM
In addition to ordering appraisals through our website appraisal orders can be placed through Mercury Network and AppraisalPort.

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January 12th, 2019 5:45 PM

Planning to Buy a Home in 2019?


Mortgage rates are starting off 2019 at very good levels. In fact, mortgage rates declined, starting the new year with the 30-year fixed rate mortgage dipping to 4.5 percent last week from 5 percent a month ago, according to mortgage finance provider Freddie Mac[1]. After a year of gradual increases, mortgage rates are declining. Stock market volatility, global trade worries and the government shutdown are pushing rates down to their lowest levels since August.

But how do mortgage rates affect homebuyers? Fixed-rate mortgages are amortized over the life of the loan. That means that at the beginning of the loan term, most of the mortgage payment goes toward paying off interest. Over time, a larger percentage of the monthly payment is applied to the loan’s principal balance. Thus, when interest rates are low, homeownership is more affordable. If less is spent on interest, homebuyers may be able to afford a larger loan. However, higher rates increase the long-term cost of owning a house.

NAR calculated the monthly payment based on the mortgage rate in the first week of January (4.5 percent) and the rate (5.0 percent) that was previously expected. Nationwide, it is estimated that the monthly payment at 4.5 percent rate is $1,208, while a higher rate of 5.0 percent increases the monthly payments by $72 to $1,280.

The effect of the mortgage rates varies from location to location. In high-end areas, homebuyers are expected to benefit more from lower rates than homebuyers in other areas. For instance, in the San Jose-Sunnyvale-Santa Clara, CA metro area, comparing the monthly payment at 4.5 percent and 5 percent rates, homebuyers pay $353 less every month for their payment at a 4.5 percent rate. However, at the low-end areas, in Youngstown-Warren-Boardman, OH-PA, the monthly payment at 4.5 percent rate is $26 less compared to the payment at 5 percent rate.

The visualization below allows you to see how much the monthly payment changes at 4.5 and 5.0 percent rates for 178 metro areas:

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Posted by Robert W. Peterson on January 12th, 2019 5:45 PMLeave a Comment

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September 14th, 2017 11:23 AM
In addition to providing appraisals throughout Northern California, we have expanded our coverage area into the state of Oregon, We have recently opened a branch office in the city of Portland to provide appraisal services in the greater Portland market including the counties of Multnomah, Washington, Clackamas, Yamhill and Hood River. In addition to the greater Portland market we also service some of the more remote counties in Oregon  including Klamath county, Lake county, Deschutes county, Douglas county and Coos county. We continue to offer quality appraisals along with  quick turn times usually within 5-6 days from the inspection date. Feel free to contact us if you have a specific county where you need to have an appraisal completed,

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Posted by Robert W. Peterson on September 14th, 2017 11:23 AMLeave a Comment

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