The Burnside Blog

Posted By Mike Thelin on 04/10/2008

After a front page story on the gloomy state of Portland’s condo market last week, now the Oregonian’s Ryan Frank reports glimmers of hope in Portland’s slightly battered housing market. Sellers, it seems, are starting to budge on their inflated list prices. This is good news going into spring as summer, which are typically the two busiest seasons in residential real estate.

Last week Frank reported slow condo sales at a time when more than condo 1,300 units were on the market. Frank also reported that Developer Homer William’s 2121 Belmont, an ambitious 123-unit condominium in close-in SE Portland, would be converted to apartments because it hadn’t sold one unit since its sales office opened last fall. The Belmont Street project joins the ranks of the Ladd Tower along the South Park Blocks and The Wyatt in the North Pearl as large condominium developments converted to apartments.

Real estate professionals are worried about the condo glut in the short-term, but luckily it comes at a time when apartment vacancies are incredibly low in close-in neighborhoods. On one of the many times I moved to Portland, in the fall of 2002, I was able to find an apartment in one afternoon. Yesterday, a friend informed me of his efforts to find an apartment in Portland. At an open house for a one-bedroom listed in the heart of NW Portland, more than 15 people showed up. While the condo market is sagging, it seems that the demand for apartments will help absorb some of these condo units, which could easily be converted back to condominiums at a later time.

Of course, developers are aware of this trend. I know of several apartment buildings in the works in close-in neighborhoods that are being built to condo specifications so that they can be converted once the market improves. And for a metro area of more than two million residents, what’s 1,300 units?

Plus, as anyone who has recently purchased a condominium in Portland already knows, now is a good time to buy. Prices are negotiable, and there’s less competition, that is, If you can get financing. “The major change is that 100 percent financing has gone away, and the appraisers are being much more conservative in their analysis.” says Dan Volkmer, a top Portland broker who has been selling real estate for 30 years. Volkmer, who currently has three condo transactions in escrow, says 100 percent financing is a tool that only showed up very recently. What we’re seeing, Volkmer says, is simply a return to a normal market.

What surprises me most is how a few gloomy articles can taint the opinion of an entire city. Two years ago, buyers would line up to purchase overpriced units and pay $20,000 above the asking price. Now, with lower prices, less competition, more selection and increasingly stable lending terms, buyers become sheep. To buy residential real estate first and foremost is to purchase one’s home, but it also remains the most important and largest single investment that most people will ever make. So like any investment, does it really makes sense to follow the masses? It never has.