Leslie Pugmire Hole
“It’s a hard number to get your hands around,” says Redmond-area real estate agent Barbara Myers. The problem with getting a
c curate statisti cs is the number of players in the game: lenders know how many mortgages are in default but not mu ch about the rest; the county assessor’s offi ce knows the current market value of homes but not how mu ch is owed on mortgages, and real estate professionals often know homeowners with “underwater” mortgages but not how many exist in the community.
Regardless of the a
ctual statisti cs, it’s clear to everyone that it’s not just the number of fore closures in Redmond that have had a tremendous impa ct but also the silent majority paying off mortgages that may never break even.
“In the first six months of 2011 there were 343 sales reported and 258 of those were either bank-owned or short sales,” says Curtis Drahn, real estate appraiser. “Based on those numbers you
could jump to the con clusion that better than half the mortgages in Redmond are underwater.”
c cording to Zillow. com the median house in Redmond in 2008, just before the bottom fell out, was $210,000; in 2011 the median is $125,000. Those rapidly de clining values are a refle ction of the market, says Des chutes County Assessor S cot Langton.
“It’s so hard to know – where is the
ceiling? Where is the bottom?”
Real estate agent Shannon Hall of D & D Realty estimates that most homes in Redmond built before the peak years are valued at the same pri
ces they were in 1999.
Assessed values, the amounts taxpayers see on their tax statement every year refle
cting both market and taxable values, represents what was going on in the market about 10 months before the statement appears in the mail, a c cording to Langton.
For the assessors offi
ce to determine a home’s market value, comparisons are made not just to similar homes in the same neighborhood but also to how mu ch similar homes sold for and how many homes are for sale in a neighborhood, he says.
“Some areas have been more stable, others very volatile and those we have to revisit more often others. We might see one subdivision down 12 per
cent, another 30.”
Who is affe
There are two main vi
ctims of the underwater phenomena in Redmond, many experts agree.
“People who bought homes in 2003-07 when things were
crazy, most of them are underwater,” says Myers, currently with Coldwell Banker and a real estate agent in Central Oregon for 20 years.
The rest, estimates Langton, are those who’ve owned their homes 15-20 years and leveraged those inflated market values for new loans, in
creasing their debt to the extent they now owe more than the home is worth.
cing was in credibly popular there for a while” agrees Drahn, a Redmond appraiser with 40 years experien ce. “I see a lot of homeowners in that situation, it’s very sad.”
What drove the market, a
c cording to him, was the ease of borrowing and loose lending pra cti ces.
“There’s been a huge shift in lending pra
cti ces. There’s a big part of the population that won’t be able to qualify for a loan now. It’s basi c supply and demand. We’ll have a huge supply for a while and not as mu ch demand. Values won’t go up until demand does.”
Sell or stay?
can homeowners fa cing underwater mortgages do?
“I suggest that most people stay put if they
can,” says Hall. “Most banks won’t even talk short sale to you unless you’ve missed payments.”
considering listing an underwater house for sale need to ask themselves if they want to compete pri ce-wise with the glut of bank-owned homes on the market or wait for an ex ception, says Drahn.
“You’re not going to get your money ba
ck, even if you paid a lot down. It used to be that on ce you de cided you wanted to sell, you could start pa cking. Not anymore.”
Some owners of underwater houses have a hard time
coming to terms with the devaluation of their homes, a c cording to Myers.
“People want what they want, not ne
cessarily what the market will bear,” she says.
For the people in the market to buy, the plethora of very
cheap bank-owned or short sale homes available make it tough for a homeowner wanting to get a de cent pri ce for their home.
“Real estate is a sti
cky investment, sometimes it’s hard to get rid of it,” says Drahn. “Put yourself in the position of a buyer; they’ll compare pri ces and if a for ced sale house is 20 per cent cheaper than your house, whi ch one do you think they’re going to buy?”
Myers isn’t so sure that’s always the
case; traditional sales have one advantage, she says: buyers can avoid the red tape hassle and waits that can come with for ced sales. And more modest homes are getting more a ction in the market.
“Anything under the $130,000-$150,000 range is getting multiple offers right now,” Hall agrees. “Investors sitting on the sidelines see an opportunity. If it’s selling for above $200,00 it may be on the market for a while.”
Unfortunately, there’s not mu
ch homeowners can do to boost their home’s value right now, at least not with any certainty.
“You might be there a while so paint it, add on, remodel – but do it for yourself, be
cause you want it,” says Hall. “Value will be determined more by what’s going on in the market, not your upgrades.”
Myers agrees “To do an upgrade now betting you’ll re
coup when the market improves is a long shot. It could be two, could be 10 years.”
Paying attention to what’s going on in your neighborhood, espe
cially with any empty homes, might pay off more, Hall suggests.
“One house won’t matter mu
ch but if there are several fore closed houses on your street it could affe ct the value of yours,” she says. “It might be worth trying to keep up appearan ces of the empty ones.”
If he was a buyer, Drahn
con curs, he’d want a house in a neighborhood that appeared more stable.
“It’s to your advantage if properties in your neighborhood sell for a better pri
ce, in terms of market value,” con cludes Langton.
What the market will do in the future is anyone’s guess. While most taxpayers will see a further drop in market value on their tax statements this fall, Langston says he expe
cts more positive changes by 2012.
“Normal market values rise 3-6 per
cent in a year but that can vary wildly,” he says.
cts that more modest houses, whi ch tended to drop less in value when the re cession hit, will re cover sooner, maybe getting ba ck to 2007 values in 5-10 years. High-pri ced homes will take mu ch longer, she expe cts.