Annual forecast sees slow but sure growth ahead for housing

by: TRIBUNE PHOTO: CHRISTOPHER ONSTOTT - A new single-family home is under construction on a divided lot in Northeast Portland€sˇÃ„öˆsˇÑˆsˇˆ‚€sˇÃ Ã¶ˆsˇÃ«€sˇÃ Ã¶¬•s Alberta neighborhood. With a restricted urban growth boundary, urban density is becoming more important.In the tough past few years, Portland-area homebuilders have gone from a pessimistic could-be-worse attitude to one laced with more optimism as the region’s housing market slowly climbed out of the Great Recession.

On Wednesday morning, homebuilders heard more good news that things are definitely looking up for the local housing market, according to speakers at the annual Home Builders of Metropolitan Portland Housing Forecast Breakfast.

“To climb steep hills requires slow pace at first,” said Tom Potiowsky, director of the Northwest Economic Research Center at Portland State University, quoting Shakespeare during his presentation at the Oregon Convention Center. “That’s a nice way of taking a look at it, because what we’re really doing is we’re in a very dark, deep, dank, horrible hole and we’re trying to crawl our way out of it. We’re doing it, but it’s a slow pace going.”

Potiowsky was joined by Robert Denk, assistant vice president for forecasting and analysis for the National Association of Home Builders; Ken Perry, president and chief executive officer of Broker Knowledge Group, a mortgage consultancy and training provider; and hundreds of building and housing industry professionals.

Denk brought with him the bigger national housing picture, with a graph showing the giant peak of the housing boom, which he attributed largely to overbuilding, and the stark dropoff that followed.

“If this is our sin, this has been our punishment,” Denk said, pointing first to the peak and then to the dropoff on the graph. “I think we’re pretty much repentant now. We’ve paid our dues.”

Denk noted that nationally, the industry has seen slow improvement in housing starts, which began at the end of last year and has continued throughout 2012. Starts are still at about 41 percent of average, he said, but that’s an improvement from the nadir of 2009, when they hit 27 percent of average.

He also noted that the increase in housing starts is real and not fueled by a first-time homebuyer tax credit, which sparked a slight rise in 2010.

“This is organic,” Denk said. “And that is fundamental to getting back on track.”

In addition to improved housing starts, prices have begun to rebound as well. They peaked in 2006 nationally and then dropped off, but Denk said the steep decline eventually leads to “normalization and stabilization” in prices.

One area that is still proving to be troublesome nationally is foreclosures. Though there have been some improvements, Denk told the audience that foreclosures still “remain a problem and remain a headwind.” Oregon, however, seems to be faring better than many of the worst-hit parts of the country.

“Portland and Oregon aren’t going to have the sort of foreclosure problems that places like Las Vegas and beachfront Florida are going to have,” he said.

Positive but slow

Perry expressed caution about new mortgage industry regulations that take effect in mid-January, which he said could ultimately hamper new activity in the housing market. Even with that concern, he said builders were more hopeful than in the recent past.

“We are so happy to not be where we were,” Perry said. “We’re moving forward and I think, together with that positive outlook and watching the numbers, we are in for a really cool ride.”

In his presentation, Potiowsky noted that patience will be key with this slow recovery, but also that Oregon has a lot of “underlying strengths.” Among those: unemployment of 8.6 percent as of October, which was down from 9.3 percent last year, and the fact that the state was recently listed as the 26th fastest in terms of growing new jobs.

Low mortgage rates are also expected to remain in place through most of 2013 and possibly into 2014, which is helpful to the housing industry. He predicted slow economic growth, and said housing will follow suit.

“The bottom line is it will be positive going forward,” Potiowsky said. “Positive but slow.”

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