I am constantly amazed by media reports suggesting that the residential housing market is about to crash. Having a degree in economics, I can’t help but be cognizant of rational factors suggesting otherwise, at least locally.
Certainly, the slight increase in residential mortgage rates, decrease in residential building rates, and reports of an elevated supply of homes on the market relative to the last few years are factors which would dampen sales and prices. We have to remember, however, that the sales pace and rapid price-pressure appreciation of a mere two years ago was not normal. It was blistering. There is every reason to believe that the local housing market will do just fine in the mid and long term.
Without question, the most important, steady factor driving housing demand is population. Every relevant study has predicted a fairly high rate of population growth in Clark County from migration and internal growth for the near, mid, and long term, and why not? The Pacific Northwest, and Vancouver in particular, are very desirable places to live. Migration from over-taxed Oregonians and Californians combined with natives of Southwest Washington who choose to keep the area as their home will help to provide a constant supply of homebuyers.
The modest rise in interest rates should not, rationally, be a significant detriment to the residential housing market at this point. As an extremely experienced mortgage loan officer once told me, 6 percent money is really 4 percent money, and even 9 percent money is really 6 percent money in residential home borrowing when you factor in the average taxpayer’s ability to deduct the mortgage interest for income tax purposes. Home interest loans are still, then, a decent bargain.
Property values also affect the ability to borrow funds, but in my lifetime I have never witnessed a downturn of overall property values, even after sharp spikes in increases. Certain properties will be affected modestly, and prices might be lowered on individual properties that aren’t selling as rapidly as the owner might wish, or which were overpriced to begin with. The property values overall, however, should not be expected to markedly decline from present levels, and the sustained values will support financing needed for transactions.
There are other encouraging factors including the proposed lifting of the building moratorium near the I-5/I-205 interchanges – an obviously desirable location for suburbanites, especially those who commute to Oregon for work – and the proliferation of townhome building. The party wall townhomes fill a void that has existed for several years. They provide relatively affordable housing in today’s market conditions, and are becoming more and more available in the $200,000 to $400,000 range, which is attractive to the first time home buyer, as well as the buyer seeking a moderately priced new home.
Of course, as we all know, public perception also influences the economy, even if the perception is based on irrational factors. Logically, though, those investing or otherwise relying on the local residential housing market, with the possible exception of speculative buyers hoping to flip a property quickly for profit, should be just fine.
David W. Meyer’s practice emphasizes strategic planning, contract drafting and negotiation for clients under the areas of business law, estate planning, real estate and land use. He can be reached at 360-737-2301 or david.meyer@bullivant.com.
