Are Real Estate Prices Falling in NW Oregon?March 14, 2023
The global pandemic hammered many industries and led to massive unemployment, but home owners saw the value of their homes increase. Home prices not only continued to rise in many cities across the nation, but they increased even more than in the previous year. The widely quoted Case-Shiller Index of national home prices available from the St. Louis Federal Reserve showed a 19.2% increase over the year to January 2022. The trend continued for the first half of 2022, and the index increased by 9.4% from January to June. But June was the high point for 2022, and the index fell by 4.4% from June to December. This fall in the home price index coincided with the increase in the federal funds interest rate by the Federal Reserve and the subsequent increase in home mortgage rates.
This raises the question, how is the real estate market in Northwest Oregon? The answer is that the Northwest Oregon counties seemed to follow a similar path in 2022 compared with the national market, although their price declines lagged by a few months. Residential property average sales prices reported by RMLS from January 2022 to August rose 7.5% to $582,100 in the North Coast region (Clatsop, Tillamook and Lincoln counties combined). Then from August to December average prices in the North Coast region fell by 2.2%. In Columbia County prices from January to their peak in November rose by 14.2% to $464,100, then fell by 1.0% the next month. In Benton County average prices peaked in October at $523,800, an increase of 4.7% from January. They then fell 2.0% by December. (All prices are based on a 12-month moving average.) It should be noted that Benton County reports few home sales to RMLS so the prices can vary quite widely from month to month.
The volume of homes sold as reported by the RMLS system also fell somewhat in 2022. The North Coast region reported 1,728 closed sales for the year versus 1,941 sales for 2021. Columbia County had 800 closed sales in 2022 versus 970 in 2021. Benton County managed an increase in 2022, and reported 299 sales versus 258 closed sales in 2021. Not all realtors report sales to RMLS.
One drawback in using home sales to evaluate the real estate market is that the quality of houses sold each month is not consistent; one month may see more high-quality houses sold, the next month may see more low-quality houses being sold. One way around this problem is to use economic models to estimate values for all the residential property in an area. Zillow does this modeling and makes the data available on the company’s website. The chart below shows the smoothed, seasonally adjusted measure of the typical home value for each county. It reflects the typical value for homes in the 35th to 65th percentile range.
The Zillow estimates for the five counties in Northwest Oregon also show that home values hit new highs in 2022, at least until July. Price increases from January through July ranged from 6.5% in Columbia County to 11.8% in Clatsop County. Unfortunately for home owners, prices began dropping in August – shortly after and during the period that the Federal Reserve began aggressively increasing the federal funds rate.
Of course the real estate industry is much broader than just buying and selling homes. Some of the larger businesses are involved in rental management. Additionally, many jobs, especially brokers, in the real estate industry are not covered by unemployment insurance and consequently aren’t reported to the Oregon Employment Department. The reported jobs are more likely to be support and office staff for brokers or maintenance and cleaning staff for real estate rental agents. The employment that is reported for real estate was 24 jobs higher in September 2022 (the most recent data) than September 2021 for four of the Northwest Oregon counties as a region (Tillamook County’s real estate employment is confidential), but the individual counties varied. Over the year Benton County gained 29 jobs, Clatsop County’s employment was up nine jobs. Columbia County added five jobs, and Lincoln County shed 19 jobs. The four counties together had 1,199 jobs that were reported to the Employment Department in September 2022.