Comparatively reasonable property prices here may cushion our landing It's hard not to fret about mortgage problems and their impact on real estate, credit availability and stock prices on Wall Street. It's even harder to come up with solid information about how all this affects us and our neighbors here on the Lower Columbia.
It's important to distinguish between the problems we hear about from national news media and the much-different conditions we actually experience in our own towns and neighborhoods. The two are often very different; it's a big country. Just as news of a horrendous crime in Connecticut can make us feel less secure in our West Coast homes, economic horror stories from California can send psychological reverberations throughout the entire nation's housing market.
The current issue of Business Week reassuringly notes that homes continued to increase in value in 97 of 149 U.S. metro areas in the most recent quarter of 2007. Here in the Pacific Northwest, cities from Salem to Spokane and back to Seattle are resisting the housing slump. Will they continue to? And can the same be said of the Long Beach Peninsula?
We won't entirely escape the widely publicized crisis in the mortgage-lending industry. Far from the past when traditional banks wrote cautious 30-year fixed-interest home loans, in recent years many have turned to out-of-town lenders with comparatively lax standards. This is the shakiest house of cards in the national economy right now, with all lending getting tougher and more expensive in reaction to the sloppiness of these companies.
Locally, real estate in most towns has been a bargain at least until the past couple years and is still under-market value compared to many coastal areas. This means there hasn't been the same level of reliance on zero-down, adjustable-rate and other unconventional mortgages as in some over-heated areas in California and the Northeast. There certainly will be some who suffer the consequences of ballooning interest rates and other fallout from the credit crunch, but overall our exposure to these problems is considerably less dramatic than that of other regions of the country.
A bigger potential problem may be the after effects of home-equity borrowing. Many of these loans also are adjustable rate. But here, too, comparatively modest home values may be our salvation. Lower prices mean that less was available to refinance. As an expert told Business Week, "The Pacific Northwest was a little bit late coming to the party. The extreme appreciation over the past five or six years in the country only just began in the Northwest a few years ago." This is even truer out here on the coast than along the I-5 corridor.
With the population of Washington and Oregon inexorably increasing, and an inevitable tide of Baby Boom retirees looking forward to their Golden Years at the seashore, additional residential building and property development are a certainty in Pacific County, for good or ill. Tighter credit and more economically conservative attitudes very well may negatively affect the pace of home sales here for a while. It may be that the rush of homebuilding that has occurred here will mean a surplus of houses for sale. In the short-term, it will take longer to sell houses and be more difficult to get loans to buy them.
But all this merely fits into historic cyclical trends in our coastal real estate market. Prices shoot ahead for a while, then slacken, then gain strength again.
And what of the stock market? Here, too, unless you are for some reason being forced to sell stocks immediately, losses will remain on paper and merely hypothetical. Over the long haul, an appropriately diversified portfolio of stocks and bonds is still one of the best bets for financial security.
The nation and our region will both do well by regarding houses as places to live, not as sure-fire investments or equity piggybanks that can be robbed at will. While all this shakes out across the country from us, take a deep breath, sit back and remember to enjoy the view.