Price appreciation and rising interest rates limit buying power
Combined with approximately 20 percent home value appreciation in Clark County, rising interest rates may have the greatest effect on the residential real estate market in 2006. But while the market is anticipated to slow, the bubble isn’t expected to burst in Clark County.
"It’s going to be a good year, but not as good as 2004 and 2005, which were off-the-chart record breakers," said Mike Lamb, Windermere Vancouver associate broker. "We’ve had four to five good years in a row. I suspect 2006 will be more like 2003."
Wells Fargo Area Sales Manager Mike Liane expects a 10 percent downturn in the market overall, but he said purchasing will remain strong. He points to "a tremendous amount of new construction and programs affording people to buy homes" as catalysts for continued growth.
Liane said the refinancing market will slow in 2006.
Bank of Clark County Assistant Vice President and Residential Real Estate Lending Officer Stephanie Diaz said she expects the market to return to a normal pace in 2006.
She said more people were willing to jump into real estate in 2005, including first-time homebuyers and investors. Homebuyers were purchasing with no money down or moving money out of the stock market and into real estate.
Diaz expects that to slow with higher home prices.
"It seems people are wanting to buy more than they can afford," she said. "The average home price is out of the first-time homebuyer’s budget."
Lamb said activity will be good in 2006 – and more rational.
"In 2005, people were caught up in the frenzy and making decisions that in a saner environment would not have made sense," he said.
There was a lot of speculation in the market and people were paying too much he said.
Matt Lewis, public affairs director for Pacific Lifestyle Homes, expects appreciation to return to the 5 to 7 percent level.
A growing inventory will help to keep home prices in check.
Realtors Multiple Listing Service data showed in October that active listings in Clark County were up 20 percent from a year ago, only the second time since April 2001 that there have been more active listings than the same month in the previous year. The 2,730 active listings represent a three-month supply, up from a 1.6 month supply in June, said Lamb.
Lewis said Pacific Lifestyle, which builds in Oregon and Washington, is on pace to close 380 homes this year and wants to exceed 400 in 2006.
While a growing inventory may hold prices, recent price spikes and interest rate increases have dampened buying power.
The median sale price for a residential home in Clark County in October was $238,400, up 27.34 percent from a year ago.
Appreciation has priced many first-time buyers out of the market and builders are finding it more difficult to build affordable homes with increased land and regulatory costs.
"There are segments where there will be a lot of pressure, particularly the lower end," said Lamb.
The growing inventory should create a buyer’s market for homes priced above $350,000, according to Lamb. But continued job growth and movement by homebuyers from Oregon to Washington will offset negative market conditions, Lamb and Lewis agree.