Multiple offers? Properties selling the day they go on the market? If you’re in the residential real estate market, you’ve heard these stories.
In commercial real estate, even for the casual observer, it’s hard to miss the signs of new buildings going up and new businesses opening. This article discusses how these current Clark County conditions and trends fit into the ups and downs of national economic cycles.
How long can this hot market last?
The Business Cycle Dating Committee of the National Bureau of Economic Research determines the beginning and ending dates of U.S. recessions. It has determined that the U.S. economy has experienced 11 recessions from 1946 through 2009. The committee determined that the 2007-2009 recession (the deepest since World War II) began in December 2007 and ended in June of 2009. We’re now just short of nine years (107 months) into the recovery, while the average recovery lasts only about 58 months and the longest – 120 months – happened in the 1990s.
By the middle of next year, then, this current recovery will have been the longest in post-war history. That’s not to say that the recovery has been steep, quick or complete – but it’s better than recession. That said, unless the laws of economics get repealed, the chances increase with time that the rate of growth will slow – not that home prices will decrease, but that the rate of increase will slow.
Residential real estate
A lack of inventory of houses for sale (and strong demand) continue to be the biggest factors in local, residential real estate. As a result, home prices continue to rise (the median home sale price is now $345,000), but the inevitable end to the current economic recovery needn’t be a gloomy forecast, as the increase in residential home values has been more measured in this recovery than the spike in demand we witnessed in the years just before the housing market crashed. That spike was caused in part by loose lending practices and a frenzy among non-owner occupied buyers.
In the current local market, legitimate demand has been fed by first-time homebuyers, new residents and renters who have discovered that homeownership is a buffer against rising rents. Where the frenzy just before the last recession saw people camping out to buy as many houses as they could, and so-called “liar loans” (with no requirement that a borrower provide proof of income) were prevalent, lenders are much more prudent these days.
While new housing developments are sprouting up all over Clark County, land costs keep the prices of those homes from easing the shortage of entry-level homes that are the target of first-time buyers and people like “empty nesters” that want to “move down” into smaller or less- expensive homes once their kids move out on their own. Currently, buyers in most price categories don’t have as many choices as they might like, and those buyers better act quickly if they want to beat out other buyers competing for the same house. Looking ahead to the someday change in this supply/demand dynamic, even though interest rates and the economy as a whole may become less favorable, few experts foresee a downturn in home values anywhere near the foreclosure and short sale crisis that dominated the last recession.
Commercial real estate
Commercial real estate activity is just as hot. Construction crane and road/utility installation activity is visible at several sites, most notably the Vancouver Waterfront Development west of the Interstate Bridge, evidence of new multi-family residential, office and restaurant projects. Several factors are driving this level of activity – continuing population growth, tax law changes that may spur relocation of Oregon residents and businesses to Clark County, and fear of higher interest rates in the future.
Title company resources
Your title company can be a resource for real estate professionals, investors and anyone needing property information or contacts within the industry. We maintain a database of all Clark County and Skamania County properties and offer a variety of products and services, including title insurance and other informational property reports, escrow and builder/developer assistance.
Scott Hogan is manager of Clark County Title Company. He is an attorney licensed to practice in Washington and Oregon, and a native of Vancouver. Readers are advised that no legal advice is intended by this article, and that independent counsel on these matters is highly recommended. Scott and his wife live in the Salmon Creek/Mt. Vista area.