Rogue Valley and South Coast Housing Market TrendsJuly 11, 2019 Recent housing data, courtesy of Zillow Research, shows that the housing market in the Rogue Valley and the South Coast is beginning to stabilize. The rate of increases in home prices and rental costs are starting to slow or level out. In other words, the hot housing market we’ve seen coming out of the Great Recession is beginning to show some signs of cooling.
Many, but not all, areas of the country saw a run-up in home prices prior to the housing bubble collapse during the Great Recession. Rogue Valley and the South Coast were no exception. Home prices in Jackson County, for example, rose moderately prior to 2003 – the average home price was about $175,000 in the summer of 2003. Just three years later, in the summer of 2006, the average home sales price peaked at $295,000. The saying “what goes up must come down” applied to home prices as the housing bubble popped during the recession. Almost as rapidly as home prices rose, the average home price in the Rogue Valley fell to about $170,000 in early 2012.
As the recovery from recession took hold, home prices again began to climb from their nadir. But this latest run-up in prices appears to be based on more traditional supply and demand factors, rather than the speculative buying, home-flipping, and lax lending standards that spurred the 2003 to 2006 home price spike.
Once prices began to collapse, many borrowers were over-leveraged in their mortgages and quickly found themselves underwater – owing more money on their homes than they were worth. Soon foreclosure and real estate owned properties were being dumped on the market, and home prices continued to drop. If you were fortunate enough to keep your job and income through this whip-saw period of rising then collapsing home values, owing more on your property than it could be sold for was not a problem, since the mortgage could still be paid. But many who owed more than their home was worth also lost jobs, or saw their incomes fall. Many decided just to walk away and let their lenders foreclose on the property, further flooding the market with available properties. Rental prices didn’t experience the same boom-bust cycle. Many counties in Oregon saw similar boom-bust-recovery trends in their home sales prices.
As some former home-owners were forced to rent, additional demand for rental housing was created and possibly kept prices from declining during the recession. In 2012 and 2013, Rogue Valley and South Coast rental prices were generally flat, rising just slightly in Jackson County from about $1,050 in mid-2012 to about $1,150 in mid-2014. During the next three years, average rental costs in Jackson County, and other counties in Southwestern Oregon, increased at a faster pace. By mid-2017, average rent in Jackson County reached just more than $1,500 per month. By summer 2017, average rents exceeded $1,400 in Curry County, about $1,300 in Josephine County, and about $1,200 per month in Coos County. From May 2018 to May 2019, the pace of rental price increases generally moderated – aside from Josephine County where the average price climbed 6.2 percent. The rate of rental cost increases were lower in Coos (3.5%), Curry (1.7%), and Jackson County (1.2%). If wages can keep rising with the tighter labor markets, that may help the high number of Rogue Valley and South Coast renters who are considered “rent-burdened,” paying 30 percent or more of their income on rent. That is, if rental costs continue to stay fairly flat going forward.
Home sales numbers also reflect a slight cooling trend in the overall housing market in the Rogue Valley and South Coast. This is likely a response to rising prices that have brought the average sales prices back to, or just above, their pre-recession peaks. Monthly home sales in Jackson County hit a recessionary trough in June 2008 when just under 150 homes exchanged hands. Sales numbers trended generally higher through 2017 – more than 350 homes were sold during several months that year. Sales numbers edged lower in 2019, closer to 300 homes per month sold. Josephine County saw a similar patter, with the recent peak of about 130 sales per month occurring in late 2016 and early 2017. In the most recent months through May 2019, about 100 homes were sold per month in Josephine and also in Coos County. Curry County has seen a generally rising trend in home sales, but at a much lower volume of transactions than other more populous counties.
The decline in home sales in recent months coincides with a long-awaited – from a buyer’s perspective – upturn in available inventory of homes for sale. As prices have regained their pre-recession levels, and the economy has generally been on solid footing, sellers might be more apt to place their homes on the market now that they are likely no longer underwater in their mortgages.
The number of homes for sale in Jackson County peaked in late 2014, when about 1,600 homes were on the market. By early 2017, available inventory fell to about 1,100 homes for sale. By May 2019, according to Zillow, there were nearly 1,450 homes for sale in Jackson County. Josephine County saw a similar but overall flatter trend. Inventory peaked in mid-2014 with about 750 homes on the market and then inventory fell to about 500 in mid-2017. During the past year, Josephine County homes for sale inventory has varied between about 625 to about 550 in May 2019. The South Coast, Coos and Curry counties, have both seen declining inventory through mid-2019.
The number of new homes and rental units being constructed, as well as population change and rate of new household formation, are other factors that impact rental and home prices and availability. While recovering somewhat from the past recession and the bursting of the housing bubble, overall residential construction activity remains below the longer-term average in the Rogue Valley, especially when you look at population growth over the past few years. In the classic case of Economics 101 at play, the lack of new residential units, especially in multi-family or units targeted toward renters, has led to low vacancy rates and is a factor in rising rental costs, particularly in the Rogue Valley.