Real Estate Market Report

MARKET NEWS

An Expert’s View on Yamhill County Housing Market

Presented by Carrie Palmore, The Palmore Group - A Premiere Property Group, LLC Team

These days, everyone is talking about the real estate market. That’s no different in Yamhill County. With increasing sales prices, multiple offers and houses going pending in a couple days, everyone is wondering how long this can last. Sellers are seriously considering selling but worried they will have nowhere to go. Buyers are worried they are overpaying, and the market is going to crash. In the meantime, interest rates are low, inventory of homes is at an all-time low and there doesn’t seem to be any change on the horizon.

So how did we get here and more importantly, where does that leave us?

If we take a look at the last housing boom of 2005-06, things were significantly different. The lending world was loaning money to just about anyone. And they were doing it in creative ways destined to fail. Money sources were not documented, many loans were “stated value”, meaning you could say you made any amount of money and it wasn’t verified. A lot of the loans had ARMs (Adjusted Rate Mortgages), meaning the interest rate could be adjusted yearly. Those loans alone took a lot of people down as the market shifted. Rates went up, which meant house payments went up and people who had bought at the top of their budget could suddenly no longer afford to make the payment. It was a house of cards that came crashing down. We all know about the mortgage meltdown. It was the perfect storm of an economic downward spiral. The banks failed, which caused job losses, which caused foreclosures, which caused increased inventory, which caused more job losses, followed by more foreclosures, and, well, you get the picture.

Suddenly, you had an over-supply of homes on the market, Sellers who wanted (or needed) to sell and couldn’t, Buyers who couldn’t qualify and banks that took forever to make decisions.

Those were tough years. It was heartbreaking to sit in homes of Sellers who desperately needed help and having to work with banks who didn’t care about the people, but only the bottom line. Slowly we made our way out of that market. The lending world set much more stringent guidelines. Interest rates were lowered, first time home buyer programs were put in place and people began purchasing homes again. Home prices rose very slowly at first, as everyone was hesitant to get back in the game, but the market started picking up again. But a crucial mistake had already been made.

Given our population growth, we need to build NEW homes at a rate of 1.2 MILLION new homes a year. When the market crashed, most building stopped completely. For several years. Which quietly started us sliding backwards in inventory EVEN WHILE WE HAD A PLETHORA OF INVENTORY ON THE MARKET!! By the time builders started building again, we were already several million homes behind and we’ve been playing catch up ever since. According to Dr. Lawrence Yun, the leading economist for the National Association of Realtors®, March of 2021 finally saw us reach 1.74 Million home starts. This is the highest in 14 years.

But now builders are facing ultra high building costs, both in material, government regulation, and building infrastructure fees. There are many builders sitting on the sidelines, who own property, but due to the high cost of building, are choosing to sit on the property for now and not build. When you take into account that you have to pay almost $40,000 to the local and state government organizations just to break ground on a single-family home, then factor in the high material costs, you can see where this can affect home prices and the housing shortage.

But enough about economics, what does that mean for today’s Buyers and Sellers?

The first problem is the inventory. Or lack thereof. In a normal market – meaning about 4-6 months of inventory – there is enough homes available for the Buyers looking to purchase. In this type of market, you can keep the inventory active and moving because you have a strong “move up” market, meaning Sellers who are selling their first (or second) home and moving “up” to their next home. In many cases, this means they are writing offers contingent on selling their current home.

However, in this market, Sellers are stuck in their houses because their contingent offer won’t be considered among the many cash and non-contingent offers submitted on each home. If you are a Seller wanting to move, what are your options?

When considering options, there is ALWAYS the “do nothing” option. In this case, the Seller stays put until the market changes and contingent offers are replacement property (in a specific period of time). If the Seller can’t find a property within that time period, it is either terminated or a new time period negotiated. Other Sellers are choosing to take advantage of the market and sell now and find alternate places to stay until they can find the right home to purchase. Many are moving out of state, purchasing RVs, staying with family or finding a rental. In fact, this is what we did before we bought our current home. Sold our home, purchased an RV and lived in it for 4 months while we searched for and found our current home. This meant we were more competitive in our offers since we were not contingent, and we could be flexible with a closing date based on the Seller’s needs. Once we purchased the home, we sold the RV and the costs we spent were about the same as if we had rented during that time.

Which brings me to Buyers and what makes a good offer in today’s ultra-competitive market. Hopefully you are working with a seasoned Realtor® who understands the current market and is a good communicator and negotiator. Writing a good offer means understanding the needs of the Seller. What is important to them when looking at the offer? Many times, it is much more than the price. What type of loan is being used? How much down payment is the Buyer using? Do they need flexibility with the closing date? Either a fast close or a longer close or perhaps a certain number of days of rent back after closing. What about repairs?

While I NEVER recommend waiving an inspection or appraisal contingency, perhaps as a Buyer, you might consider asking for NO repairs. When you state “no repairs” up front and a Seller is looking at multiple offers, that carries a lot of weight. Perhaps you allow a Seller to leave some personal property behind (meaning trash) and you deal with it. Be creative. What are you willing to do to get into the house? How can you make it easier for the Seller?

Maybe, as a Buyer, you choose to sit it out for now. This market will change. It always does. As some of the new homes get built, as interest rates start to rise, we will begin to see more inventory hit the market. That means that a Seller who sees 10 offers now, will get three. Maybe instead of going pending in 2 days, it will take 2 weeks. The market will start to change, and different strategies will come into play. Sellers will take contingent offers again and now more inventory can hit the market as the “middle market” can start to move again.

Whatever option you choose, whether you are a Buyer or a Seller, one thing I know for sure is – this too shall pass.

Carrie Palmore, OR Licensed Principal Broker & VP of Education & Training Premiere Property Group, LLC.

carrie@palmoregroup.com 503-415-0631 700 Deborah Rd. Ste. 200 Newberg, OR 97132 www.palmoregroup.com