OLMIS

by Martin Kraal
Published Sep-21-2012

Homeownership Housing Units in Oregon Housing Prices in Oregon Summary

The Great Recession, which lasted from December 2007 to June 2009 as defined by the National Bureau of Economic Research (NBER), significantly impacted the Oregon economy and labor markets. Although there are typically many factors that lead an economy into recession, the Great Recession is often characterized as being caused by a "housing crisis." Employment fell considerably and high unemployment levels have persisted as the economy is slow to add jobs - and many people blame the slow housing market for lackluster job growth, especially in the construction sector. But how have homeownership and the number of housing units in Oregon been impacted by the recession and recovery?

One indicator used to track the health of the housing market is the homeownership rate. The homeownership rate, as defined by the U.S. Census Bureau, is the count of owner occupied housing units divided by the total number of occupied housing units in an area.

The U.S. Census Bureau publishes estimates of homeownership from two different surveys: the Housing Vacancies and Homeownership Survey (HVS), and the American Community Survey (ACS). The HVS has quarterly data which are more timely, but the ACS annual data tend to have a lower margin of error because it includes more households in its sample.

According to the HVS, homeownership rates decreased slightly in Oregon and the U.S. from 2005 to 2012 (Graph 1), while the decline was more pronounced in Portland.

Both Portland and Oregon as a whole began experiencing declining homeownership rates as early as 2005 - well before the housing crisis began in early 2007. Furthermore, Oregon and Portland both experienced their lowest homeownership rates during the first quarter of 2008 and have seen some improvement in this measure throughout the recession and subsequent recovery - even as homeownership rates nationally have continued to decline.

Annual data from the ACS show a different trend. According to the ACS, the homeownership rate in Oregon peaked in 2006 at less than 65 percent and has been declining steadily since the onset of the recession (Graph 2). Neither of these surveys is "more correct" than the other, and since the two survey estimates have overlapping margins of error it is likely that the actual rate of homeownership lies somewhere between the two estimates.

Data about housing units may help clear up the confusion caused by diverging homeownership rate estimates - but housing data come only from the American Community Survey and are therefore more likely to match up with the more pessimistic homeownership rate resulting from the survey.

The number of owner-occupied and renter-occupied housing units increased from 2005 to 2010, though the number of owner-occupied units decreased in 2008 and 2009 during the recession (Table 1). From 2005 to 2010 the number of renter-occupied units increased more, on both a percentage and total units basis, than did owner-occupied units. The data on owner-occupied housing units in the United States show a similar trend; the number of owner-occupied units decreased in 2008 and 2009, while the number of renter-occupied units increased.

The number of vacant units in Oregon increased more than the number of occupied units from 2005 to 2010 (Graph 3). During this period, the number of vacant units increased by 27 percent whereas the number of renter- and owner-occupied units increased by 9 percent and 4 percent, respectively.

Based on estimates from the U.S. Census Bureau's American Community Survey, Oregon's median house value increased from $201,200 in 2005 to $273,300 in 2008 before decreasing to $244,500 in 2010. This somewhat supports the ACS homeownership rate trend as more homeowners moving out of their homes would put downward pressure on home values.

Further supporting this view of the data, it appears that average rent prices have increased in Oregon over the same period as a result of strong demand for renter-occupied housing units. According to consumer price information from the Bureau of Labor Statistics, the average cost of rental housing in the Portland/Salem area increased by just more than 10 percent from 2007 to 2011. During the same period, home values fell nearly 27 percent in Portland according to the S&P/Case-Shiller Home Price Index.

Although conflicting survey results paint a murky picture of homeownership rates in Oregon, it is likely that homeownership in the state has decreased since 2007. Estimates of owner-occupied housing units from the American Community Survey show that there were roughly 8,100 fewer owner-occupied homes in Oregon in 2010 than there were in 2007. Meanwhile, the number of renter-occupied housing units increased by roughly 43,300 in the state. Vacant units grew by 31,500 over the same period.

Estimates of home values and rent prices in Portland and Salem seem to support the conclusion that homeownership rates have declined in Oregon during the recession and subsequent recovery, even though data from the Housing Vacancies and Homeownership Survey indicate that homeownership in Oregon has been increasing or steady since 2007.