Prices and markets cannot read.

Nor react to studies & hoped-for bubble bursts.

When people stop liking their houses (or the cost of money gets too high) then they'll start renting. In the meantime, in an "over-valued" market Americans can afford them at record pace. Home ownership in 2006 is now the highest in USA history (and highest in history for blacks).

Anyone who is using housing as their primary investment vehicle may be in for a shock. Real estate is the most ill-liquid of investments. Equity is just a made up number. You don't get your expected equity unless someone is willing to purchase your house for the price you want.

I am a real estate appraiser, so please do not take my comments as indicating any particular value in any particular property context -

In Central Oregon we see a market with certain underlying aspects that are not going to change because someone used a particular methodology to arrive at a concept they defined on what constitutes "over priced". Those underlying concepts are population increase, limitations of land available for development, and the supply and cost of money (interest rates).

My County, Crook County, had 11,000 people when I arrived in 1990. It now has almost 24,000. No big deal. Except, given the size of this population, the 5 people a day that are moving here need a place to live. Up until a couple years ago, you would find in any given year about 275 residential properties would come on the market. - 5 people a day, let's conservatively say 2 families, is more than twice as much demand as our historical real estate market could supply. Hence, we now have (pause while I use my fingers and toes to count) 12 new subdivisions that I can think of that came on line within the last twelve months.

As you all know, for better or worse, but we accept it exists, Oregon's land use laws place an urban growth boundary around our towns and cities. That creates a short supply of land. You might argue that the land use laws require a 20 year supply of land for residential building - but you'd be right on the detail but wrong on the effect. Much of that 20 year supply around our State are large parcels held for later profit. They are theoretically available, but not today. When rapid growth kicks in that was not anticipated in the 5 year updates to the County plan, you get severe shortages.

In my area, within the Prineville urban growth boundary with lots less than .4 acres (generally called a "city lot"), these bare lots have gone from a median price of $52,000 a year ago to a current median price of $80,000 for a 53.9% annual increase or 4.5% per month increase.

In the category of 1.5 to 3.0 acre suburban lots, median prices have gone from $29,000 a year ago to $87,750 currently for a 302.6% annual increase or 25.2% per month increase. (That's one cold statistic that deserves a WOW!!)

Land shortages both in Crook County, and in the neighboring Bend Oregon area have had a measurable effect upon bare land prices.

In our residential sector, site built home median sales prices have averaged a 2.08% monthly increase during the last year. -- Say you have a modest $100,000 house. At this rate your house is appreciating in value at $2.86 per hour - 24/7. You'd have to earn take home net pay of $12.01/hour based on a 40 hour work week to earn as much as your house.

--- Which gets to the issue of affordability. All markets correct themselves, naturally. This type of market cannot sustain itself. Sooner or later you run out of money to keep buying land and houses that appreciate this fast. The cost of money (interest rates) is also going up - slowly. So far the 1.5% increase from the low of a couple years ago has had little effect on the Central Oregon real estate market. A few people have lost their ability based on the financing ratios to buy more expensive homes, but there have been less expensive homes available. A few people who might have been able to buy a home a couple of years ago now cannot buy even the least expensive house in the market. -- That number will grow as values go up and interest rates go up. But that number will remain low enough that it will not drag down the market in a sharp manner. My best informed guess is that a gradual leveling out values in the market will take place.

So - is this an over priced market? One perspective is that we are catching up to values found elsewhere. If that perspective is true, then no, it's not over priced. For a couple of decades values in the San Francisco Bay area - the next large real estate market to the south - have been much higher than in Oregon. For a similar time, the Seattle area real estate market has had much higher values than the Oregon market. If our rapid increase in values brings us up to those levels, can we call the result "over priced"?

I think there is a flaw in any valuation model that takes a static assumption of value as its core starting place. Values are always fluxuating. I believe that we are in the middle of a regional realignment of values, Oregon is catching up.

As much as this would hurt almost all of this community, I wouldn't mind seeing home prices drop in the next year as I will be graduating in exactly 1 year from now and hopefully buying my first house a couple of months later. However I have seen that housing has been overvalued for many years now and in California espicially, yet the bubble has never burst. I guess only time will tell.

I'm not even going to presume to know enough about the housing market to forecast price trends. I am going to point out what would seem to be the most important comment by Steve Bucknum which raises all kinds of questions:

For a couple of decades values in the San Francisco Bay area - the next large real estate market to the south - have been much higher than in Oregon. For a similar time, the Seattle area real estate market has had much higher values than the Oregon market. If our rapid increase in values brings us up to those levels, can we call the result "over priced"?

I think there is a flaw in any valuation model that takes a static assumption of value as its core starting place. Values are always fluctuating. I believe that we are in the middle of a regional realignment of values, Oregon is catching up.

We don't have anything even near the intrinsic wealth generating potential in Oregon (including Portland) compared to Seattle or the Bay Area, so on the surface this statement is not plausible. And there is nothing I've seen in local employment forecasts that would change this. So what Steve seems to imply is that to have a continuing under-supply compared to demand depends on a continuing influx of people who can overpay relative to the local market for housing. I am in no position to disagree, but everytime I ask a real estate agent or a economist-type they never can point me to the specifics of how and why this will happen, just that it will as if it is some force of nature.

Steve writes: So - is this an over priced market? One perspective is that we are catching up to values found elsewhere. If that perspective is true, then no, it's not over priced. <snip> If our rapid increase in values brings us up to those levels, can we call the result "over priced"?

<hr/>

So true...but add this fact: Corporations have now freed the cubicle salaryman (and woman). People can now work from anywhere, even the boondocks of central oregon. Many californians and seattlites now live there part or full time (dual residents...vacation house/city house). The internet, RDM direct flights to LAX, DEN, SLC, etc. And check out the Bend Bulletin article that quoted a $200K SanFran lady...."Now that Bend will have a Trader Joes, I can move there".

So $750 to $1M in central oregon is a bargain. Crook county even better...that'll get you a nice ranchette.

Howdy partner!

Steve has a good point and it is not new. "For a couple of decades values in the San Francisco Bay area - the next large real estate market to the south - have been much higher than in Oregon."

The home where I lived in high school and most of college had large square footage. Some of my high school friends lived in a subdivision called Mission Fields with much smaller houses. Our family's first home in S. Salem could have easily been a Mission Fields house, but the value of the house was lower because it was in Salem, OR. I forget the numbers now almost 40 years later, but if that S. Salem house had been magically moved intact down to Mission Fields in California, the value would have shot up.

So, was the Oregon house over valued, undervalued, or what?

Askquestions 1st writes, "We don't have anything even near the intrinsic wealth generating potential in Oregon (including Portland) compared to Seattle or the Bay Area, so on the surface this statement is not plausible."

Hmmm. Really? Exactly what is it that California "intrinsically" has that we don't that generates wealth?

Per capita - we have much more natural resource wealth.

Any time there is a concentration of population, there is a concretration of wealth - but per capita??? I ran homeless shelters and a soup kitchen in the Bay Area - give me smaller Oregon any day.

Just because California is a larger land mass with ten times our population does not make it "intrinsically" better at producing wealth.

Please explain --

Comparing Oregon real estate pricing to regions which do not use Urban Growth Boundaries "compares apples to oranges". As Steve noted, we sustain higher demand because developers must recycle urban housing stock and building lots - restricting supply - not just toss clapboard across the next farm field.

Pour water in a bowl, and it rises to its boundary. Pour water on a table, and it flows to the edge and then the floor. Simple physics answers a lot of questions.

Recycling sustains value.

Steve -

Hmmm. Really? Exactly what is it that California "intrinsically" has that we don't that generates wealth?

Despite what you say, in a market economy, population size does translate to higher per capita income due to the wealth generating (and multiplying effects) from larger populations interacting daily with each other. Creating more and different jobs than smaller areas can support. And the harder those areas fall economically due to the current bad economic policies, the harder and longer the effect on the whole national economy because those population centers are a component of the demand for the productivity of smaller areas. What's worse, if that demands go offshore the situation gets even worse.

What we are seeing now in housing prices has still not been well explained economically. If the popular accounts of the recent Harvard study predicting a flattening of housing prices, now considered to be one of the more optimistic predictions, are correct, it seems to suffer from an averaging assumption that may obscure the real dynamics of the market. (And depends on increased immigration driving demand which would seem to be at odds with current sentiments across the political spectrum.)

Harry -

I'm not assuming you're arguing for or against the supposed trend that a certain segment of our population can plugin and live whenever they want. But it is the case this will still only be a small segment of the population (not too mention that some of the low-end work that can be de-centralized due to communications networking is still being offshored). One thing that is hard to come by in the popular literature are many studies quantifying the true productivity effects of this trend. Particularly when one considers the increased costs of sustaining the mobility of these folks which must be factored into prices, and the loss of productivity that some argue results when folks don't interact in the 1000 different ways they do when they are physically co-located.

Leo -

The implication of your point about the UGB is unclear. If "recycling sustains value" at the cost of making housing more unaffordable, is sustaining value through recycling a net social good or not? As you frame it, it may be good for the fortunate few, but a net social negative. Care to elucidate?

The numbers you cite are crunched by computers sitting in a secure cold room somwehere.

Computers do not ski, surf or bike. They do not get to live, work and hang out in beautiful, clean, safe, low, low, low tax Portland, which is why our famous "Second Paycheck" will ensure that our houses will always be worth a great deal of money when compared with our neighbors.

Plus, millions of baby boomers are buying second homes. Where? Central and Southern Oregon.

I just hope there's one that's still affordable when we retire in a few years.

Some clarifications:

Housing costs are really locational costs; most bought houses are not new but older, more used.

Those high site values can be our friends, were we to recover and share them, as does Aspen CO. With a land tax or land use fee or land dues, we could recover high land values, and with a public dividend to residents we could share them (similar to Alaska's oil dividend). Not only do buyers and renters benefit. So do homeowners, who'd no longer have to sell out or borrow against equity.

"Home ownership" also includes people paying off mortgages; their equity is actually quite low, lower than in a long time. "Home owership" is more like it.

Growth boundaries are not the basic problem. You find "land shortages" outside of Oregon, too. There they blame zoning and environmental regs. The real culprit is land speculation, tying up buildable land, waiting for higher prices. Charge owners "land dues" and they quit speculating and build or sell to others who will.

Popping the bubble might hurt first, but long run it helps. Right now, way too much purchasing power is sucked away by debt, by mortgages, by high land prices. Once land gets affordable again, then the economy can re-kick-start itself. No pain, no gain.

See our website for more. Ciao.

Jeff - it is exactly this part that I find most troubling -

"Finally, we calculate a “constant” term for each metropolitan area. These control for historically observed differences in metro area price-to-income ratios that is not explained by the other three determinants. The numbers range from -3.1 to +3.2 and reflect a variety of difficult to quantify, but nonetheless important, factors that influence prices. Such factors that influence metro area constants would include pollution, climate,expected property price appreciation, cultural amenities, school systems, miscellaneous costs, (e.g. tax and utility rates) and geographic location."

We have a variable situation in the Portland area and in the rest of the State. Over the last 20 years, we have filled our urban growth boundaries, and have in fact only in the last 10 years hit the wall. Those 25 foot wide houses in North Portland didn't really get going until about 6 years ago. It just happened this year that in the Central Oregon market people became willing to buy lots with older houses, tear them down, and "recyle" the land for a better house.

So, using a constant based upon a perception of static history is a methodological mistake. The recent history here isn't static enough.

Askquestions 1st - You didn't back up your claim with any facts, just more opinions. You claim there is a higher per capita income in the Bay Area (and they just might to equal their expensive housing). Yet, they have one of the higher rates of poverty in California. --- Some rich might be richer, but the poor are also poorer. Some neighborhoods as a consequence might have more expensive housing (like the Avenues in San Francisco) and others have problems like Richmond (Contra Costa Co.) and east Oakland (Alameda Co.). The Bay Area is actually an 8 County mix of all sorts of income levels and economic influences. It's like Oregon in miniture. The "City" (meaning San Francisco) is the central business hub fed and sustained by the rest of the Counties. The rest of those Counties don't necessarily have it as good as the "City". -- Just like Portland and the rest of Oregon.

In any case - I see on the ground lots of things not otherwise evident to statistics. I always ask people when I appraise their homes where they have come from. I'm getting a lot of Bay Area and Seattle responses, people who came here for lower cost housing, and in doing so are raising our values closer and closer to the values they left. I see this migration of people bringing their money with them as a regional realignment. It is just as much an influence as urban growth boundaries, the cost of money, and anything else.

-- I don't see how the study that determined "over-priced" areas of the Country really took this sort of migation factor into account.

interesting debate on a complex phenomenom.

One interesting sidebar to note that Paul's statement about moving to Vancouver is that the cost of transportation is not very often figured into "locational" costs. Transportation is a much smaller part of an urban dweller's budget than a suburban dweller's and almost of the same magnitude as housing. Nationally, combined cost of transportation and housing average 50% of household income. If you live in a conveniently located home (access to transit, services and jobs) you pay more for housing and less for transportation. If you live in the boonies, you pay less for housing, but, unless you are lucky and can actually find a decent job in the boonies, you spend a lot commuting.

Of further interest is that growth boundaries, natural or legislated, also reduce the cost of transportation. For example, the average household in the Portland Metro area spends only 15% of its income on transportation (that includes Clark County) while in similar western cities the number is 19%. Think that is chump change? Adds up to $1.8 Billion we aren't sending to Kuwait or Tokyo. Kind of reverse economic development.

About Clark County vs. Portland. You will save on your housing living in Vancouver. Plus, you will also save on state income tax (9%).

Do you realize that mortgage reps. are going along with county assesors to determine value? They want to make sure that there's a 5-7% markup, even if you buy and then turn right around and sell.

Well, a "good" blog should inform, educate, expose areas in need of debate, provide debate, trigger thinking, etc.

In the theme of "educate", I will respond to "Rebel Dog" somewhat against my better judgement - this could be a complete waste of my time.

Rebel Dog, you wrote, "Do you realize that mortgage reps. are going along with county assesors to determine value? They want to make sure that there's a 5-7% markup, even if you buy and then turn right around and sell."

Mortgage Loan officers in the case of a sale, can only work from an earnest money agreement. They do not set the terms of a real estate deal, influence those terms, or have anything at all to do with those terms. In fact, in a sale scenario, the Mortgage Loan Officer's beginning point is the earnest money agreement only. From there, the Mortgage Loan officer reviews the qualifications of the borrower, their credit rating, and orders an appraisal of the real estate to establish that its value is sufficient to act as collateral for the loan.

I think you were thinking of Real Estate agents when you wrote your comment. In Oregon and most everywhere under current law and regulation, there are Real Estate agents/brokers who list a property for sale and represent the seller, and Real Estate agents/brokers who represent buyers and work to find them houses that meet their needs. Generally, real estate commissions are in a range of 5 to 6% of value. So, if a seller is to break even on a quick resale of their property, a break even point is reached when the sale is for a total of their purchase price, plus the cost of the commission, plus closing costs. Generally real estate is not a "quick turn" investment, so generally this is not the real reason prices go up.

Rebel Dog, the part of your comment about County Assessors doesn't make sense. In Oregon after Measure 5 from 1990, and Measure 50 from the later 1990's, County Assessors values don't amount to a hill of beans. For example, in my County the so called "Real Market Value" of a house that might be $100,000 will probably have a "Maximum Assessed Valuation" of $75,000 upon which taxes are set. The amount of tax per thousand of value is limited by Measure 5. The amount that the Maximum Assessed Valuation can go up per year is 3%. In markets where values go up more than 3% per year, the gap between "Real Market Value" and "Maximum Assessed Valuation" just gets bigger and bigger.

In short, it does not matter in terms of how much property tax you pay how fast your house goes up in value as long as it is greater than 3%. It will probably always be more than 3%

So, between what Mortgage Loan Officers and Assessors really do, your whole thesis of your question is based upon completely incorrect suppositions. Mortgage Reps. and Assessors cannot conspire to increase values 5 to 7% a year - they are not even capable of such acts.

Learn something?

rex Burkholder: If you live in a conveniently located home (access to transit, services and jobs) you pay more for housing and less for transportation. JK: A monthly trimet pass costs $72. That will buy enough gas to commute 33.5 miles each day (30mpg,$3/gal) or 17 miles between home and job. On the bus that would be about a one-hour commute each way or ½ hour in a car. But the real shocker is when you realize that other people pay for 80% of your transit costs. If you took the real cost of that transit pass, $360 ($72x5) you get enough to make payments on a new car with a lot left over for gas and probably all other expenses. So if you are into regional economic efficiency (like Metro is for land use efficiency) you should be promoting small, efficient cars instead of transit. Also if you have a car you can commute further, to a wider choice of jobs in the same time, which will, on average, improve your income and overall standard of living. Cars give wider choices.

rex Burkholder: If you live in the boonies, you pay less for housing, but, unless you are lucky and can actually find a decent job in the boonies, you spend a lot commuting. JK: Of course all of the best jobs are in “the boonies” nowdays. Like Nike, Tektronix, Intel, Open Source Project. The reality is that relatively few jobs are downtown anymore, except government, burger flipping and latte servers. There will be even fewer after the streetcar encourages condos to replace jobs in the inner SE industrial area.

rex Burkholder: Of further interest is that growth boundaries, natural or legislated, also reduce the cost of transportation. For example, the average household in the Portland Metro area spends only 15% of its income on transportation (that includes Clark County) while in similar western cities the number is 19%. Think that is chump change? Adds up to $1.8 Billion we aren't sending to Kuwait or Tokyo. Kind of reverse economic development. JK: A better comparison would be average commute lengths. Or perhaps annual miles per vehicle. When put in money terms you get data that is inappropriate for the comparison that you are making because of things like sales and other taxes applied to automobiles in other regions that have no counterpart in Oregon. Don’t forget that, our urban form is resulting in unaffordable housing when we pay over $½ million per acre in N.E. Portland.

BTW: I have posted some historical climate change news headlines at: http://www.saveportland.com/Climate/index.html

BTW2: Why is trimet trying to attract yuppies out of their BMWs instead of improving basic services for the low income?

Thanks JK

Leo Schuman:As always, the right answer lies in balancing the two tensions: managing the UGB to limit sprawl and the resulting destruction of natural habitat and farmland, while maintaining relative affordability. Expand boundaries only when genuinely needed. JK: Just comparet he cost of a 1/4 acre parcel of land on both sides of the UGB to get a feel for the price we are paying to have density shoved down our throats. Around $200,000 just for the land before you even build on it. And what is outside the UGB? Let me guess $20,000 and let someone correct me. That difference is what the UGB costs people. That is why your children won’t be able to afford a home.

Leo Schuman:Another angle to re-consider is the whole concept of "ownership". JK: Which is the foundation of the middle class wealth in this and other countries. Take away that asset and you can’t borrow money to send the kids to college or to start a business. Of course it is mostly bad Metro policy that has made home owning a risk through falsely high cost.

Leo Schuman: On a related note, isn't it possibly more "affordable" to live in a relatively reasonably priced condominium or apartment near a dense urban core - eliminating the need for a car JK: The problem with this is the your job choices are reduced so you will likely have to take a lower paying job. For a given commute time, transit can only reach a small fraction of the places that a car can. That reduces your job choices and hence income. You also have to commute standing next to a drug deal or being packed in between two people with hacking coughs instead of sitting down in your car enjoying your own music and coffee.

Thanks JK

What about the single person - and not the single family? I have always found it difficult to get a house simply because 'one person is not a family'. Because I have no kids and no wife, lenders look at other ingredients that they wouldn't look at if I was married. This makes it even more difficult when the price is high for something that even a family of two can't live in. The way it is going, I will be renting for the rest of my life simply because of the inflated stickers of the housing market and the fact that single people are pariahs when it comes to houses.

Leo Schuman: JK wrote: The problem with this [the affordability of living car-free, in urban areas close to public transport] is the your job choices are reduced so you will likely have to take a lower paying job. For a given commute time, transit can only reach a small fraction of the places that a car can. That reduces your job choices and hence income. You also have to commute standing next to a drug deal or being packed in between two people with hacking coughs instead of sitting down in your car enjoying your own music and coffee.

All of which is a precise argument for focusing investment in public transportation and neighborhood-focused housing/business density JK: Good idea except that it will eliminate even more family wage jobs by making big employers go away. And mass transit is more costly than small cars, so your expenses will go up. And mass tranist uses more energy per passenger mile than small cars, so what is the point?

Leo Schuman: rather than continuing to burn up dwindling fossil fuels and raw car-building materials, leaving tapped-out resources and eco-systemic pollution for our grand-children, JK: You don’t have clue what our grand children will need or want any more than Teddy Rosevelt knew that we would need fiber optic lines, freeways and jet planes. Neither YOU or ANYONE else has the ability to see the future.

Leo Schuman: all so we can enjoy "our own music and coffee" while clocking a daily two hour commute to/from the 'burb JK: I get the impression that you want to dictate to others how they should live. To get a sense of this why don’t you try living the way Gorge Bush wants you to live for a few weeks and get back to me on the subject of basic freedom.

Thanks JK

Leo:

At our current rate of consumption, proven global petroleum reserves will last roughly 40-50 years. U.S. coal reserves should last at least 300 years, assuming an aggressive increase in consumption. If history is any guide, we will continue to add to these proven reserves, albeit at a higher "cost of finding" than in the past. That said, it would be very wise to decrease our consumption of distillates (gas/diesel/kerosene), and eventually limit them to their most productive use (aircraft, trains, M1A1 tanks).

Will we "run out" of inexpensive oil and natural gas in the next 100 years? Probably. Will something else have likely supplanted petroleum by then? Very likely. If not, then our grand kids will all be living the life that the greenies/hippies would prefer we start living today...So why the long faces?

Gecko: At our current rate of consumption, proven global petroleum reserves will last roughly 40-50 years. U.S. coal reserves should last at least 300 years, assuming an aggressive increase in consumption. If history is any guide, we will continue to add to these proven reserves, albeit at a higher "cost of finding" than in the past. That said, it would be very wise to decrease our consumption of distillates (gas/diesel/kerosene), and eventually limit them to their most productive use (aircraft, trains, M1A1 tanks).

Will we "run out" of inexpensive oil and natural gas in the next 100 years? Probably. Will something else have likely supplanted petroleum by then? Very likely. If not, then our grand kids will all be living the life that the greenies/hippies would prefer we start living today...So why the long faces? JK: Well said. Good to find another rational person in Portland.

Thanks JK

Leo Schuman: Jim Karlock wrote: "You don’t have clue what our grand children will need or want any more than Teddy Rosevelt knew that we would need fiber optic lines, freeways and jet planes. Neither YOU or ANYONE else has the ability to see the future."

Actually Jim, if we "stay the course" and leave our grandchildren a petroleum based transportation system - but no more petroleum - then it's painfully easy to see what they will need, but not have. JK: Tell me your secret: How do you see the future when everyone else has failed through the ages?

Leo Schuman: He then wrote: "To get a sense of this why don’t you try living the way Gorge Bush wants you to live for a few weeks and get back to me on the subject of basic freedom."

Jim, I truly don't give a damn how George "Wiretap" Bush wants me to live. JK: Neither do I, but you completely missed the point which was that YOU are telling others how to live, ignoring that they have their own beliefs on how to live. To get a feel for what YOU are asking OTHERS to do, try subjecting yourself to living someone else’s beliefs, for instance Bush’s. Better yet, just keep your religion to yourself - telling others how to live has no place in public policy.

Thanks JK

Disclosure: I am a Realtor (Kari’s as a matter of fact). I write a real estate blog. It is my job to sell homes. Debate away on whether or not there is a bubble and whether or not it is going to burst. Anybody who gets into real estate thinking it is the way to a quick buck should have their head checked. Real estate is not a liquid asset. Historically though, real estate, over time, has been a good investment. Before any of you say it, any Realtor who doesn’t think the way they get paid is going to change will go the way of the dinosaurs.

RMLS keeps track of all of the Metro area’s real estate data. The May edition came out on Friday: there are more listings (up 29%) and fewer pending and closed sales (down 10%) from this time last year. So that’s that, the bubble has burst. Not so fast. Appreciation for the same period is up 17.4% and the average home price for the last 12 months is now up over $300,000. Our market is going to have to get down right frigid before tomorrow becomes a better time to buy than today. It could happen.

Moving to Clark County gets you an average sales price of $289,000 but if you work in Oregon, you still pay Oregon income tax.

What does concern me is that as property prices increase rapidly, the rental market does not keep pace. It used to be 20% down on an average priced home would make a good rental. Not the case anymore. It is getting harder and harder to cash flow in newly purchased property. Our latest properties lose money on a monthly basis. We will have to subsidize the rent with positive cash flow from our longer held properties. It doesn’t make me happy but with a long term goal it makes sense. Rather than explaining it here you can read more about that on PortlandRealEstateBlog.com. I’ll also post more Market Action news and graphs over there.

Now that the previous investment model doesn’t fit our current situation, there will be change. We are seeing few out-of-area investors looking at Portland. Rents are going to increase, bringing the gap between the costs of owning your home and renting it closer. I started the year saying that I expected (high) single digit appreciation for 2006 but that would still indicate a strong overall market and it looks like the market is exceeding that six months into the year.

Buying real estate banking on appreciation is simply speculation. You better have a plan and/or reasonable expectations.

Charles write: Moving to Clark County gets you an average sales price of $289,000 but if you work in Oregon, you still pay Oregon income tax.

I'm not a tax accountant, but my short calculations indicate that the rates are slightly lower for non-residents. Based on 2005 rates, a non-resident with an income of $75000 would pay 825+(.09x[75000-13300])=5553, while a resident would pay 4128+(.09x[75000-50000])=6378.

Sources: pg. 23 of the Oregon short form instructions; pg. 26 of the Oregon non-resident form instuctions.

Also, if you have some income from non Oregon sources, that is protected from Oregon income tax.

Could the real estate market exist if people didn't breed irresponsibly (read unsustainably)?

Rebel Dog: Could the real estate market exist if people didn't breed irresponsibly (read unsustainably)? JK: We don't do that anymore. The USA's birth rate is approximately at replacement level - we are growing only through immigration.

Thanks JK

By "we" I meant homo sapiens. The overall US rate has gotten pretty level, though in recent years it has been trying to get ahead again. Please supply evidence to the contrary, but I believe there is serious concern in government that it should be a positive growth rate, before immigration.

The US also has some well defined groups that are consciously trying to expand the rate again, like the Mormons. With that notable exception, there's a very high correlation between not having a high school diploma or equivalent and having more than 3 children. Maybe we can agree that we should be working for universal education for women.

There's also a definite marketing strategy to get people to consume more/head. If you look at the short list of "got a new baby, gotta get a __", and compare 1970 to today, you might wonder how people got by only a generation ago. Whatever you perceive out there, the point was that I can't see that it's sustainable. Since the real estate market is tied intimately to these issues, saying this isn't sustainable reduces to saying that the real estate bubble will probably only burst if we do start living sustainably.

Last week on CNNMoney.com:

Housing boom 2.0

Harvard study says there may be bumps along the way, but that the long-term health of the housing market is intact. By Les Christie, CNNMoney.com staff writer June 13, 2006: 3:18 PM EDT NEW YORK (CNNMoney.com) - The housing market is entering a down cycle, according to a report from Harvard's Joint Center for Housing Studies, but is unlikely to undergo a severe reversal. The market may face risks as interest rates rise, decreasing affordability and expanding inventories, according to the study, but the market will suffer only a modest downturn unless the broader economy collapses and jobs dry up.

Scroll down to the bottom and there is a link to overpriced areas. Bend gets the number five spot. The best value? Five different areas in Texas!

Gecko, the "greenies" I know (not exactly radicals) aren't for a virtual return to the stone age - they're for a higher priority but sensible transition away from excess consumption, and toward carbon-neutral fuels.

Increasing demand from China will also affect prices (despite somewhat higher fuel economy standards there), but the environmental costs (particularly the prospect of rapid, protracted climate change) are a factor as well. Even if we had endless supplies, it makes environmental, national security, and economic sense to reduce usage where possible and expand alternatives. Seems to me that the risks of dragging our feet for another decade are far higher than the risk of a shorter-term economic challenge.

EJ:

Your claim of discrimination against singles is truly bogus. Millions of singles buy homes every year, and I believe one of the fastest growing homebuyer segments is single women. I was single for many years before getting married at 46. I bought my first home at 27, owned several others since then, and even bought a second home in 1994 which I still own where I hope to retire with my family.

Lenders don't care whether you're single or married. All they care about is your credit-worthiness and continued ability to make your mortgage payments. If you have the income, they'll pursue YOU!