NAR Chief Economist Lawrence Yun at OAR convention in SunriverThe highlight of last week’s Oregon Association of Realtors conference in Sunriver had to be the presentation by National Association of Realtors Chief Economist Lawrene Yun. Not only is Yun an excellent speaker, but the information he shared was enlightening and, in many respects, encouraging.
One potential point of concern that might come as a surprise  — especially considering how much media attention has been focused on the high level of real estate activity this summer: “Nationwide, we are seeing that our upward trend ended about three months ago,” Yun said. “We keep track of the number of lockboxes that are opened, and that number has dropped significantly.”
Is this a permanent change or a pause? Yun’s prediction: The number of closings may be down for the next 12 to 18 months, and the market may lose a little steam.
However, Yun doesn’t believe we’re in another real estate bubble.
“I think the decline will be temporary,” he said. “San Francisco’s recovery is a good indicator, and the San Francisco market is very strong right now.
“What happens in San Francisco is a good indicator of what will happen in Oregon and Washington,” Yun added. “And right now, Portland and Seattle are appreciating at a very similar rate.”
Another timely topic of concern for many folks: the nation’s so-called “shadow inventory” (properties under distress, including bank-owned properties and those owned by seriously delinquent borrowers). That picture varies greatly from state to state, Yun said: “In North Dakota, for example, where the economy is strong, it’s very, very low. However in New York, nine percent of all mortgages are in distress.
“By comparison, in Oregon and Washington, about five percent of homeowners are in distress, and shadow inventory is up. One reason is the lengthy foreclosure process (compared to California, where shadow inventory is down and the process is quicker).”
This helps explain why low inventory continues to be an issue in many Oregon markets. Underwater homeowners don’t want to sell until they’re above water (unless they have to).
For inventory to increase, builders need to add more homes, Yun said.
And how are builders responding? They aren’t, Yun said: “Although building is up about 20 percent, compared to the levels of building historically, they’re shy. In Oregon, there were 20,000 new housing starts in the year 2000. There were as many as 30,000 during the heyday of 2005-’06. In 2012, there were 10,000.”
What’s the hold-up? In the past, Yun said, half of building was done locally; but now it’s primarily Wall Street firms. And Washington D.C. considers construction loans very risky, Yun added. As a result, local builders can’t get local banks to loan them any money.
Consequently, Yun said, inventory will continue to be tight.

 Other insights from NAR Chief Economist Lawrence Yun:

  • Nationwide, inventory is at a 13-year low.
  • Nationwide, new construction is at a 50-year low.
  • The Wall Street Journal Home Price Forecast for 2013 is for a 7 percent increase; for 2014, it’s a 5 percent increase.
  • Portland’s closed sales are up 18 percent from a year ago, and its home prices are up 15 percent.
  • One-third of all transactions this year have been cash (normally, the average is 5-10 percent). That’s a testament to today’s tight lending standards.
  • Mortgage interest rates have been below 6 percent for more than five years. The lows were reached in 2012, at 3.5 percent. In August 2005, the average was 8.5 percent.
  • Because of the many large-scale lawsuits that have been filed against the big banks, the banks are holding onto their cash reserves (which are substantial) rather than infusing the money into the economy.
  • Since the recession, the country has lost eight million jobs; we’re still down (currently at seven million) but are heading in the right direction.
  • The rental population is growing but the home-owning population isn’t. At one point, 70 percent of Americans were homeowners. Now it’s 65 percent. Yun expects the number to go down a bit, to 63-64 percent.
  • There’s a dramatic difference in the net worth of renters vs. homeowners. It’s $3,000-$4,000 for renters and $150,000-$250,000 for homeowners.


About the Author
Lisa Broadwater, GRI, CDPE, is a Central Oregon-based real estate professional who specializes in listing and selling homes, especially in Sisters, Tumalo, Bend and Redmond.