Tuesday, February 08, 2005

Outsiders fuel housing boom

Home sales in the Portland area are defying a national cooling trend, powered by monied out-of-staters and low rates
Tuesday, February 08, 2005
DANA TIMS, The Oregonian

Thousands of newcomers are driving a continuing housing boom in the Portland area, countering national trends.

Low interest rates have been credited with the nationwide record pace of new construction and sales. While the boom may be slowing elsewhere, robust levels of home construction, along with sales of existing dwellings in the Portland area, describe trends far more frenetic than chilly.

Builders, real estate agents and population experts point to newcomers -- well-to-do ones -- keeping the market hot.

"In-migration is significant right now," said Randy Sebastian, who owns Renaissance Development. "And it's not just anyone who's moving here. They're high-earning professionals who are able and ready to buy new homes."

At least 20,000 more people moved into the Portland area during the past year than moved out, said Barry Edmonston, director of Portland State University's Population Research Center. Statewide, the difference probably topped 30,000, he said.

Records based on out-of-state driver's licenses surrendered by incoming residents to the Oregon Department of Motor Vehicles indicate most new arrivals came from California, Washington, Arizona, Colorado and parts of the Midwest. Most are of working age rather than retired.

"When the economy is very strong here, we get a pronounced influx of people accepting job transfers," Edmonston said. "But even when it isn't that strong, we still get a net inflow of at least several thousand people into the metro area alone."

Jim Chapman, president of Legend Homes in Tigard, addressed the hot construction market with a bow to low interest rates. The rates, despite the Federal Reserve's gradual increases in its benchmark federal funds rates since June, are dipping further. Fixed-rate 30-year mortgages fell to 5.66 percent last week, marking the fifth straight week they've hovered near historic lows.

Chapman then addressed the buying power that in-migration is adding to the mix.

"It's a huge part of the market," he said. "We're getting new buyers from all over. The Denver area alone seems to have sent a bunch in the past few weeks."

Current residents are, for the most part, not among those rushing to buy new houses, Chapman said. Given regionwide density requirements, many are choosing to remodel their houses rather than purchase new ones built on smaller lots than were available when they bought or built.

New buyers are putting Legend Homes on a pace to chalk up 2005 as one of the best sales years in its 40-year history, Chapman said.

"Across all price ranges, I'm having a difficult time keeping inventory at most of our sites," he said. "It's just hot."

Last year saw a record number of home sales in the Portland area, according to RMLS, the primary regional real estate listing service. The 33,075 sale closures topped the next-closest year -- 2003 with 31,013 sale closures. That figure outdistanced the 27,695 closures in 2002.

The trends were mirrored across the Columbia River in Clark County, where a record 8,474 sales closed last year. That was well above the 7,673 closed in 2003 and the 6,373 completed in 2002.

Near-record low inventories of residential listings -- also attributable to low interest rates -- are adding more pressure to the situation. Inventories considered healthy would provide six to eight months of listings, said Mel Roemmich, a Realtor with ERA Freeman & Associates in Portland. However, that figure hovered between 21/2 and 3 months for the last half of 2004 and continued into January, he said.

Renaissance Development's Sebastian is building houses around Wilsonville, West Linn, Sherwood, Beaverton, Southwest Portland, Woodburn and Camas, Wash. Last year was his best in the two decades he's been in the business, he said. From the looks of things so far this year, 2005 may be even better.

"Interest rates continue to be a big, big deal," Sebastian said. "That helps us because we're a move-up builder, not a starter builder. People have to be able to sell their existing house to be able to buy one of ours."

But, unlike even a year ago, he added, in-migration was increasingly popping up on his radar screen.

"It's mainly California, followed by Washington, Arizona and parts of the Midwest and East Coast," Sebastian said. "They are coming here for jobs and quality of life. And even though it may be hard for some people to believe, they find our prices very affordable. A lot of people arriving from California just can't believe how less expensive the housing is up here."

John Ludlow, a long-time Wilsonville real estate agent, is seeing the same trends. Given the one-day market time it takes new listings to sell, he takes issue with national statistics suggesting a gradual slowing of new house sales.

"I don't see us slowing down here," Ludlow said. "And there are two factors really driving it: low interest rates and plenty of newcomers just now entering the market."

Tom Jacobs, owner of Edge Financial in Tigard, nonetheless thinks some cooling will start to be felt, but not because of pure market forces. Fed-induced increases in interest rates, he said, are bound to start taking a toll on construction and new-home sales this year.

As for the buying power and market demand created by in-migration, Jacobs said it's undeniable.

"People are coming from all over," he said. "Some are also leaving, of course, but it's more in than out, for sure."