Housing, Real Estate, Building Permit, and Construction Trends in the Rogue ValleyJuly 6, 2021 As one of life’s most basic necessities, shelter plays a critical role in the lives of residents of any community. Increasingly, challenges surrounding homelessness, housing availability, lack of supply, and escalating prices are becoming a common refrain. This is not new news. Even prior to the 2007-2009 Great Recession, the problem of providing adequate, affordable, and attainable housing was already seen locally as an important piece of fostering long-term employment growth in the Rogue Valley. But just in the last year, a global pandemic and in the Rogue Valley and the sudden loss of 2,500 housing units during the Almeda fire and other fires have reawakened conversations about the low stock of housing, and affordable housing in particular.
Residential Building Permits
Building permit data, a proxy for the supply of shelter or residential housing units, gives a forward-looking indicator of potential housing supply. If a permit is issued, it’s not a certainty that it will be built, and when the residential housing unit is finished and ready for occupancy is not known. But overall it’s a good measure of the pace of residential construction activity over time. Following the Great Recession, residential permits have shown modest recovery. In the Rogue Valley, residential permits have ranged between about 1,050 and 1,200 units from 2016 to 2020. While above the low point of around 500 annual residential permits issued in the 2009 to 2010 period, the level most recently is far below the 2,700 or so residential permits issued back in the housing boom era of 2003 to 2005.
During the first four months of 2021, 281 residential unit permits were issued in Jackson County. Comparable monthly data for Josephine County are not available for 2021. From 2016 to 2020, a total of 5,694 residential permits were issued. If we assume and average household size of 2.4 (most recent estimate for Jackson County), that would be enough new housing for about 13,660 residents. Population estimates from Portland State University Population Research Center show the Rogue Valley gained 11,360 residents during that time. So on paper we were matching population growth for the number of permits issued, but this doesn’t take into account the years where we were issuing far fewer residential permits coming out of the Great Recession, nor does it factor in the 2,500 or so residential housing units lost in the Almeda fire in Jackson County last summer. Much of those lost residential units were naturally occurring affordable housing, adding to the already tight housing market locally.
After the Great Recession, the Rogue Valley didn’t return to the peak employment level of about 8,000 payroll construction jobs set back in summer 2006. Summer peak employment plateaued at about 6,000 jobs in 2018 and 2019. During the pandemic in 2020, the industry only lost jobs in April and had recovered those losses by July when employment was again about 6,000 jobs. Recently, construction employment added about 500 payroll jobs since reaching a seasonal low in January 2021, to reach 6,310 jobs, the most since December 2007. Even with the steady gains, April 2021 construction employment in the Rogue Valley was about 1,140 jobs below the total reached in April 2006.
We know that many construction workers who lost jobs during the Great Recession found work in other industries during the recovery. In addition to construction worker retirements, fewer younger workers may have been attracted to this sector that experienced a large contraction in the early 1980s and again in the late 2000s. Analysis of unemployment insurance wage file data did show this shift of construction workers to other industries in Oregon following the Great Recession. When I shared these findings during a presentation, a county commissioner was in the audience and said that was his personal story. Workers who leave an industry, retire, or migrate to a different area all create job vacancies in addition to job openings due to growth. It’s important to remember that even in slow growing or overall declining industries, there are many vacancies created and a constant need to train the next generation of workforce. In our 2020 job vacancy survey, the construction industry had 420 vacancies with an average wage of $17.09 in the Rogue Valley, second behind the health care industry with about 800 vacancies. Construction and extraction occupations accounted for about 10% of Rogue Valley vacancies in 2020, according to our survey.
Building permit and construction job trends have combined with other factors like many millennials looking to transition to home ownership, rising incomes, and historically low mortgage rates, resulting in a squeeze on the supply of available homes and therefore putting upward pressure on home prices.
Rental cost data are available from the Census Bureau’s American Community Survey. The most recent data are for 2019, so they might not reflect more quickly changing conditions, such as the cost of available rental units after the Almeda fire forced many people to look for housing essentially overnight. Real estate company Zillow publishes a home price index for Rogue Valley counties. These data estimate home prices for the medium tier housing units – those selling between the 35th and 65th percentiles of all home sales. The Zillow home value index for the Rogue Valley shows an accelerating trend in 2020 and up through May 2021, where the mid-tier home price for Jackson County reached $383,812, quite a bit above the prior peak value of $338,641. Josephine County home value index put the home price at $363,192, also substantially higher than its past peak value.
Other government and private sources of home price and sales data corroborate this theme of escalating shelter costs. The Federal Housing Finance Agency publishes a quarterly home price index for Metropolitan Statistical areas. As of first quarter 2021, U.S. home prices rose by 12.6% from the same quarter in 2020. Among the ranked 260 or so Metropolitan Statistical Areas, the Medford MSA (Jackson County) home prices rose by 9.8% from first quarter 2020 to first quarter 2021, the 45th fastest increase among those ranked MSA areas. Jackson County saw average home prices rise by 40.2% during the past five years. Among unranked areas (due to too few home sales transactions), Josephine County home prices rose by 11% over the year and by about 50% during the prior five years. The advantage of the FHFA data is that it compares the change in prices for the same residence over time, whether it is sold or refinanced. They also publish a purchase-only index for larger geographies. More information can be found at https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx.
Another rich source of local real estate, home sales, and price data is available from the Southern Oregon Multiple Listing Service. Market summary and data reports for the Rogue Valley can be found at http://roguevalleyrealtors.org/market-statistics-media-menu/residential-market-statistics-menu.html.
A few highlights from the most recent reports show in the March through May 2021 period there were 674 urban homes sales in Jackson County, up from 557 the same period one year before. Josephine County urban sales also increased from 140 to 188 over that time. Median sales price during the March through May 2021 period rose by 24.6% from the same time in 2020 in Jackson County and by 20.1% in Josephine County. Jackson’s median sales price was $387,500 while Josephine’s median urban home sales price was $343,000. The average time a home spent from listed to a pending sale also plummeted during that time, from 47 to 19 days in Jackson County and from 42 to 21 days in Josephine County. During the past year, inventory of homes for sale also declined. On May 31, 2021 there were 394 homes listed for sale, down from 719 on May 31, 2020. Josephine County homes for sale inventory fell from 249 to 147 during that same time. Much more detailed data is available from the Southern Oregon Multiple Listing Service link above.
In case you weren’t sure just yet, this would seem like the quintessential seller’s market and a really tough time to be trying to buy a home in the hot market for homes in the Rogue Valley. It remains to be seen if changes such as curtailing single family zoning, incentives to create additional dwelling units (ADU’s) and other recent legislative changes that have been enacted will help increase the supply of available and affordable housing in the Rogue Valley.