Prices are down and INTEREST RATES are still at an all time low, but not for long. Experts are forecasting steady up ticks in the Prime Rate, which translates into mortgage rates up to 8.75% in less than 3 years!
Projected Future Prime Rate Values:
Apr 2010—Jun 2010 3.25 Jul 2010—Oct 2010 3.50 Nov 2010—Jan 2011 3.75
Feb 2011—Mar 2011 4.00 Apr 2011—Jun 2011 4.25 Jul 2011—Sep 2011 4.50
Oct 2011—Nov 2011 4.75 Dec 2011—Feb 2012 5.00 Mar 2012—May 2012 5.25 
Jun 2012—Aug 2012 5.50 Sep 2012—Dec 2012 5.75 Jan 2013—Apr 2013 6.00
May 2013—Jul 2013 6.25 Aug 2013—Oct 2013 6.50 Nov 2013—Dec 2013 6.75
Source Data: This Prime Rate forecast has been prepared by Mortgage-X for general illustrative purposes only. The projected future Prime Rate values are calculated by us using the statistically derived relationships between the Prime Rate and the 1-Year Constant Maturity Treasury index (also referred to as the 1-Year Treasury Bill, or the 1-Year Treasury Spot index). Calculations are based on the implied forward Treasury Bill rates derived from the term structures (also known as the Treasury Yield Curve) of U.S. Treasury notes and bonds.

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Multnomah County Recorders Office shows notice of defaults growing at an alarming rate. Another sign Portland’s housing bubble is entering a deflationary period.
Defaults from 2008 - 2009 increased 54.7%

Defaults for Q1 2010 vs Q4 2009 increased 26.7%

YOY defaults for Q1 2009 vs Q1 2010 increased 23.6%

The actual foreclosure rate has yet to catch up to these numbers as the banks have utilized the suspension of FASB 157 (mark to market accounting) to manage their balance sheets. Many a delinquent loan owner is living payment free until the inevitable occurs. Even the main stream media is foreshadowing the inevitable, and Bank of America says it will increase an already high amount of monthly foreclosures by a  600% before the end of 2010.

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THURSDAY, APRIL 29, 2010
Forbes Magazine recently published “Tomorrow’s Real Estate Trouble Spots” and the Portland area market ranks 3rd in the nation on their top 10 list of real estate with severe downside risk going forward. Eugene-Springfield ranks 9th in the nation on the list:

“While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it’s not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months”

As many have noted, Portland was late to the housing bubble party by two years, but it will not avoid the hangover -regardless of the “urban planning” argument tossed around by so many. Even those from the NW interviewed in the Forbes article throw it up like a magic shield that will prevent bad loans from ever defaulting. Hipster influx be damned. Jobs, wages, and real cash flow are all important now that the magic potion of easy real estate loans has vaporized.

The Forbes not so rosy conclusion: Portland’s real estate market has another 31% to drop from here, and we will see prices drop 9% in the next 12 months alone. The Eugene-Springfield market has another 21% to decline, and can expect an 8% hair cut in real estate prices over the coming year.

For those who’ve been paying attention, much of this decline will be predicated by the plethora of Alt-A and Option-ARM loans originated in the NW between 2005 and 2007. The majority of these types of loans have a 5 year reset/recast built into the original mortgage. Expect Portland’s market to go from bad to worse between 2010 and 2012 as a result.

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