Upside of a downturn

Bargains are found on virtually every block these days when you're shopping for a home.

If you are looking for the spanking new variety of abode, builders are taking offers.

Even with inventories declining 16 percent during the first half of 2008, there are still more than 2,500 single-family residences for sale in Jackson County. Many builders have shut down spec-home projects in favor of pre-sold residences. That means the new homes still on the market can be particularly attractive.

"Buyers want to make the best deal they can, because they don't know where bottom is," said Mahar Homes President Randy Jones, on a warm July day prior to showing a couple of new homes. "I expect to sell at least one of them."

He said he still fields calls from buyers wanting to know if the listed price is a firm bottom line.

"I tell them I will discuss it with you," Jones said. "This is the real world and we'll live in it."

In the middle of winter, Mahar Homes had eight spec homes on the market.

"We've sold five houses in six months," Jones said. "I used to do that in a month."

Even with relatively low interest rates, the slow pace of sales has driven down prices.

The median sales price of $250,000 for new construction in Jackson County is nearly 40 percent above what it was five years ago, but it has dropped more than 19 percent in the past year.

It now takes half a year for new Medford homes to move — a little less on the west side and a little longer on the east side. The median sales price for west Medford new construction is $245,000, up 52 percent since 2003, but down 12 percent from a year ago.

In east Medford, the median price for a new home is $292,450, nearly a third below what it was in 2007, but 12.5 percent greater than it was in 2003.

Builders have to pick and choose when and where to pour foundations.

"In Southern Oregon you have to be real careful where you are building," Jones said. "You don't want to be building on random lots."

Unlike past cyclical downturns, there are different elements at play and buyers don't want to be in a neighborhood perceived to be declining in value.

"We've got very good interest rates and fairly low unemployment, but we're still in a wet-blanket funk," Jones said. "There's a damper and I sense people are getting tired of this."

He points out buyers who resisted getting fixed long-term mortgages at 5 to 5.5 percent in favor of 4.75 percent interest-only rates for four years. Those buyers have turned out to be their own worst enemies and the problems they've experienced have pushed lenders to be much tougher.

"Lenders are definitely looking at borrowers' strengths, because in the past they weren't," Jones said. "The pendulum swung too far one way, now it has swung too far the other. I don't think there is a lack of money out there, but there's been enough write-downs by enough top-quality lenders that they're being extra careful."

Brett Moore, former president of the Home Builders of Jackson County and third-generation leader of W. L. Moore Construction, is confounded by the struggle credit-worthy clients go through to obtain mortgages.

"It's frustrating," he said. "When you actually have good quality customers, they're even making it tough on them."

He said his company has taken up a commercial project while it waits for the residential market to bounce back.

"We built five (residential) units this year," he said. "They're either sold or for sale; we're not really starting anything right now."

Through the first five months of 2008, Federal Housing Department figures show 179 single-family residence permits were issued in the county, compared to 543 during the same period last year. With fewer new homes being built, not only do contractors have to alter their approach, but so do sub-contractors.

"A year ago, 85 to 90 percent of what I did was new construction," said Stacy Dunn, who installs flooring for builders such as Pacific Trend Building Co., W. L. Moore Homes and Mahar Brothers Construction. "Now it's 75 percent remodels; we've definitely switched gears. It's pretty easy to figure out, people are pulling their houses off the market and putting money into new floor covering. They're going to sit on the house for two to five years and then put it back on the market. That's the general consensus of what I'm hearing."

Reach reporter Greg Stiles at 776-4463 or e-mail

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