Following a euphoric run-up that ended a little over 10 years ago, the real estate industry gagged and imploded when credit disappeared.
Back on firm foundation, real estate markets have once again rolled toward new heights.
"There's a yearly cycle and a 10-year cycle," said Lennox Scott, chairman and CEO of John L. Scott Real Estate, during a visit to the Rogue Valley this week. "It feels like we're in about the seventh inning of a 10-year cycle. The economy heats up, the housing market heats, we get appreciation, and then there's a little bit of slowdown in the economy, and that slows down the residential market."
Will there be a seventh-inning stretch to lengthen the boom, or even extra innings?
"We can already predict out into at least the summer of 2018 that there's going to be a continuation of the current market," Scott said. "In some of the metropolitan areas we're looking into a strong market at least into the summer of 2019. It's the seventh inning, but maybe it will be extended to a 13-inning game."
When activity in San Francisco, Portland and Seattle heats up, then the surrounding destination markets, such as Medford, follow suit, he said.
"The real estate market in the major metropolitan areas is job-based," Scott said. "You follow the jobs, and you know which way the market is going. In all the West Coast metro areas, it's a pressure cooker. There are so many jobs coming in and not enough inventory — especially in the more affordable mid-price ranges."
Mortgage rates routinely have an impact on buying power.
As 10-year Treasury Note rates edge up, mortgage rates are expected to follow. Yet 30-year-fixed rates have surprised time and again in recent years.
"We expected the rates to go up earlier, but they've been staying low for a very long time," Scott said. "Interest rates are back down to the high upper 3s; they were in the very low 4s. We say when interest rates are in the 4s, they're amazing. Well, they came back down to the upper 3s; they're unbelievable."
Ten-year bonds often reflect the reality that people generally move along after a decade. But the post-Great Recession trend has been for people to stay put, providing less inventory for real estate agents.
"When people move less frequently, that creates price support in the market, especially in the more affordable and mid-price ranges," Scott said. "We need supply-side housing to fill the demand. It comes down to land, zoning and the permit processing, and for the capital to flow into the housing."
Scott's regional real estate firm is based in Bellevue, Washington, where housing prices fly off the charts and the median single-family residence sales price is $660,000. While Jackson County's median sales price of $260,000 is less astronomical, the same market influences are at play.
"Normally when rates go up or down a half-point, you get a surge in sales activity," Scott said. "When they go down, everybody is going, 'This is fantastic,' and when they go up, people jump in because they are going higher."
Investors snapped up foreclosures and other bargains during the recession. There has been little impetus to trigger a sell-off, but it would change local dynamics.
"That would be great for local homeowners, once they do sell off, depending on who they sell to," Scott said." They could sell to another investment company. The local investor may parlay it into another investment project."
Even though inventories have plummeted, Scott said availability remains on its historical track, mushrooming in the spring and declining in the fall.
"Sales activity is so much higher in spring and summer because there is the available inventory," he said. "This is every year, no matter the interest rates; it follows Daylight Saving Time."
He noted Jackson County has a two months supply of houses for sale, about three months below what is considered desirable.
"In the more affordable price ranges, we have a 24-day supply," Scott said.
With changes afoot in the U.S. tax code, he said, any changes Congress makes will likely sidestep the housing industry, Scott said.
"They do not want to foul up the U.S. economy," he said. "And housing is one of the strong pillars of the U.S. economy."
— Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.