Editor’s note: This is the first installment in a year-long series of stories examining housing issues throughout the mid-valley. New entries in the series, “Housing the Mid-Valley,” will appear about once a month.
Mid-Willamette Valley residents looking to sell their homes soon are in for some great news thanks to a recovering economy, plenty of potential buyers, low interest rates and limited inventory, according to real estate experts.
Housing prices in the mid-Willamette Valley also have steadily climbed in the last three years, after sharp drops in 2009 through 2011, according to industry data from the Willamette Valley Multiple Listing Service.
With the area coming out of the recession, plenty of people are financially secure for the first time in years and are looking to purchase a house, perhaps even their first home, said Lee Eckroth of Corvallis, a principal broker for Town & Country Realty.
“We expect for it to be a pretty active marketplace in spring and summer just because there’s so much demand out there,” he added.
Brian Oare, a broker for Coldwell Banker Valley Brokers in Albany, said qualified buyers already are having a hard time finding a house in the area.
“This year is going to be real interesting,” he added.
The market doesn’t have enough inventory to meet demand, as few homes were built in the mid-Willamette Valley during the recession, especially in Benton County, real estate experts said.
Between 2008 to 2011, for example, fewer than 40 homes were built each year in Corvallis. Before the recession hit, there were nearly 200 houses constructed in the city each year, according to city of Corvallis data.
“With builders, some folks got out of the market, some folks retired, some folks moved on to other areas. It takes a while to get back up to demand,” said Jay Gordon, executive vice president of the Willamette Valley Multiple Listing Service, a cooperative of brokers that is based in Salem, and which primarily covers Benton, Linn, Marion and Polk counties.
According to Patrick O’Connor, a regional economist with the Oregon Employment Department, developers have complained that they can’t find skilled construction workers, as so many people have fled the industry due to the recession.
Lebanon-based Laura Gillott, principal broker for Keller Williams Realty Mid-Willamette, said that when the downturn happened, a huge load of properties was on the market. “No one could sell a house,” she said.
Oare said construction firms got stuck with homes built on speculation during the recession, which were then foreclosed on. Now developers are leery of building houses without a buyer.
“They don’t want to take that risk again,” Oare added.
Even if they wanted to, banks likely wouldn’t loan them the money to build out a large subdivision, said Jason Moorefield, branch manager for First Choice Mortgage in Albany.
Because of the lean market, Oare said some older residents are afraid to downsize, worried they’ll sell their old house and not be able to find a smaller home to move into.
“There are a number of good living-wage jobs coming to Albany. There are going to be people coming to town and they will have to rent, because there aren’t enough homes,” Oare said.
Developers in the Albany area, however, snatched up vacant lots for cheap during the recession, but new subdivisions haven’t been completed, and there still is a lack of new homes compared to previous years, Eckroth said.
“We just don’t have the inventory, but the market is back,” Eckroth said.
In Lebanon, two new subdivisions are under construction, Gillott said. “Building is going like crazy, and they are selling right and left,” she said.
Still, for the time being, there aren’t a lot of houses for sale. In the past, there might have been 10 or more homes available at certain price points in Lebanon, Gillott said. Now, there are three or so. Maybe. “And they go fast,” Gillott added.
Because of the low supply, experts predicted there could be bids on homes for sale in the area that are at or even above the listed price.
“People are going to have to be more aggressive,” Eckroth said.
Oare said that’s already happening.
“I’ve had listings where they will full-price offer it and then go above that to include closing costs,” Oare said.
Homes already have been moving fast, too. In Corvallis, the average house for sale was on the market for just 84 days in 2015, compared to an average of 124 days from 2008-2012. In Albany, the average home was for sale for 108 days before closing in 2015, compared to an average of 140 days from 2008-2012.
Eckroth pointed out that a typically priced home would sell faster than the average. In both cities, the average days for sale statistic includes high-end homes that have been on the market for more than a year.
Oare and Eckroth said some houses are put on the market and close 60 days later.
“In certain price ranges, homes go on the market and immediately have buyers,” Oare added. “I tell my clients, if they are in that price range, if you have any inclination or you like this house, I let them know they better move on it. If they go back home and think on it, tomorrow, it might be gone.”
That happens on both sides of the river, but more often in Corvallis, Oare said.
He also thought buying patterns were shifting.
The real estate marketplace generally ramps up in April, as families looking at homes generally want to move during the summer. That way, the change doesn’t disrupt school or other activities for their children.
Because of the lean inventory, however, “I was crazy busy through August, September, October, clear up to Christmas,” Oare said.
Prices, on average, have recovered or nearly recovered from pre-recession highs in Linn and Benton County.
And that’s part of a nationwide trend fueled by similar factors, according to the Federal Housing Finance Agency.
In Albany, for example, the average home sale was up to $223,000 in 2015, an increase of 31 percent from 2011. That year was, in general, the low point in the last decade for local housing values, according to Willamette Valley Multiple Listing Service data.
Corvallis maintains the highest average home prices in the mid-Willamette Valley, with an average sale of $314,000 for 2015. While that was up only 14 percent from 2011, Corvallis was relatively immune to the housing bubble due to limited inventory, which kept prices relatively high during the recession compared to other nearby areas, Eckroth said.
Lebanon saw average home prices increase 40 percent from 2011 to 2015 and Philomath saw an increase of 15 percent during the same time period, according to Willamette Valley Multiple Listing Service statistics.
Sweet Home didn’t follow the trend quite as neatly, as home prices remain below 2007 figures. City Manager Craig Martin said 2007 was a peak for the city in terms of new construction. “Those homes typically demand a little higher price,” he added. And in a small town, a dozen or so houses in the upper range greatly influences the average price, Martin said.
According to a November news release from the Federal Housing Finance Agency, home prices rose in every state except for West Virginia between the third quarter of 2014 and the third quarter of 2015.
Oregon ranked fourth in the nation for annual appreciation, with gains of 10 percent over the year, according to agency data. Nationwide, the average was roughly 5.7 percent.
“The factors that have contributed to extraordinary price growth over the last few years – low interest rates, tight inventories, strong buyer confidence and improving housing growth – continued to drive prices upward in much of the country. However, as prices continue to rise, reduced affordability will be a stronger market headwind,” the news release states.
With prices increasing, there could be pressure on people to buy homes sooner, rather than later.
And the possibility of mortgage rate increases also could provide incentive to purchase a house.
“Interest rates are on sale, and they have been for a while,” Eckroth said.
For 2015, the average 30-year fixed mortgage came with an interest rate of 3.8 percent. In recent years, the rate has been about 6.5 percent on average, but in the 1980s, it consistently remained above 10 percent.
Historically low interest rates mean that homebuyers can save tens of thousands of dollars over the course of their loans, Moorefield said.
Correspondingly, houses are still relatively inexpensive, despite the recent surge in values, Gordon said.
“The affordability is much greater than in recoveries from previous recessions,” he added.
Moorefield said he doesn’t expect to see much of an increase in mortgage rates this year, but he expected them to be back close to 6 percent by the end of 2017.
At a certain point, Eckroth said, a higher interest rate will negatively impact home sales.
Oare thought that would need to be much higher, noting that even at 6 percent, a loan would still be cheap compared to interest rates in prior decades.
Regardless, Eckroth said that, coming out of the recession, people are still cost-conscious, and they don’t want auspicious homes for the most part — even if they can afford them. The high-end homes market is tough in both counties, as more and more people want average homes, and to avoid overspending in general.
In Corvallis, the average home means something much different than in Albany, of course. Eckroth said demand in the Corvallis-area is strong in the $250,000 to $400,000 range.
Oare said that houses under $200,000 sell quickly in Albany, while Gillott said a sweet spot for the Lebanon market is about $160,000.
And those might be larger than a Corvallis house that sells for much more.
Oare said that a house that sells for $200,000 in Albany would go for $275,000 in Corvallis, simply because of the change of location. And the same house would probably sell for $175,000 in Lebanon, Oare said.
Corvallis has had higher home prices for decades, as the city has been seen as an attractive community in which to live, with a high education and income level thanks to Oregon State University.
Demand for rental homes due to OSU also has removed some houses from the real estate market and turned them into rentals — and replaced them with townhouses or higher density structures in some instances. With enrollment growth at OSU, the unofficial university district of rental homes and apartments keeps spreading.
OSU President Ed Ray said at a recent meeting of the university board of trustees that OSU failed to deal with the way enrollment growth impacted Corvallis neighborhoods.
Developers such as Mike Goodrich, vice president of Legend Homes, also have said that it’s more difficult to build in Corvallis than many other jurisdictions because of annexation by public vote, a complex process that usually requires consultants, much discussion by the public and governing bodies on any land-use issue and a plethora of natural resource protections, all of which slow down projects.
More time equals greater costs for developers, and that gets passed down to consumers on the price tags of homes, Goodrich added.
The restrictions on home building in Corvallis, however, also have attributed to the city’s livability, said Eckroth and Corvallis City Manager Mark Shepard, in a previous interview.
Kyle Odegard can be reached at firstname.lastname@example.org, 541-812-6077 or via Twitter @KyleOdegard.