REAL ESTATE RELIEF?

Byline: Randi Bjornstad The Register-Guard

Just listed - $209,900! Super cute 3 bdrm reads the ad in last weekend's real estate section. Just remodeled. Gleaming, high quality, solid oak hardwood floors. Gas fireplace, manicured, fenced landscape with custom fountains & small workshop. Better hurry!

While that much money could practically purchase a palace anywhere in Lane County two decades ago, today it barely buys a starter home in many areas.

The median sales price of homes sold in the county hit $223,000 in September - meaning half the houses sold for more and half for less than that amount - continuing a trend that saw median home values rise 50 percent from 2000 to 2005.

In contrast, median household income in Lane County went up 30 percent in the same time period.

Although the housing market appears to be simmering down after its sizzling showing for the past couple of years, real estate agents and lenders say prices continue to go up faster than household income, stretching first-time home buyers to their financial limits, or forcing them to look for homes in less expensive, farther-flung communities.

But Tawfik Ahdab, an appraiser and market analyst with the Eugene-based Pacific Valuation Group, says a measure of relief may be on the way for cash-strapped home buyers.

Many Lane County communities now find themselves in a "contraction phase," Ahdab said, meaning that the number of houses on the market is increasing faster than demand, relieving pressure on prices.

"Some of this change is being expressed in stabilization of prices, although they're still remaining high," Ahdab said. `But more buyers are now `waiting out' the market instead of buying at the peak, to see if there will be price reductions in the future.'

In his evaluations of housing sales statistics compiled by the Portland-based Residential Multiple Listing Service, or RMLS, Ahdab has put together a definition for "entry-level neighborhoods" where first-time or lower-income home buyers are likely to be able to afford a home purchase.

Besides being areas where both the average and median sales prices are lower than those of the county as a whole, an entry-level neighborhood also must have a percentage of market share - the number of houses sold - that exceeds its percentage of the total dollar value of houses sold, Ahdab said.

By his measure, the most affordable neighborhoods in Lane County last year included Bethel-Danebo, west Eugene, Hayden Bridge, Junction City, the Pleasant Hill-Oakridge corridor, River Road, South Lane County, Thurston, Veneta-Elmira and Springfield.

For the most part, that pattern appears to be holding true this year, with many first-time home buyers finding the best deals in west Eugene, Bethel-Danebo and River Road-Santa Clara, agreed Matt Powell, owner of Windermere Real Estate Lane County.

What gives first-time buyers greater flexibility in choosing a neighborhood is that "average selling prices are up, but interest rates are down, and there are more loan programs available to first-time buyers," Powell said.

`If they could afford a $150,000 house a few years ago, (because of these factors) they can probably afford $225,000 now,' he said. `Some of these programs can mean a house payment hundreds of dollars less than it would be otherwise."

However, because of the high cost of land and development fees in the Eugene-Springfield metropolitan area, many first-time buyers still will be priced out of the market for new homes, Powell said.

`There's a big market in the $190,000 range, but builders can't afford to do it (in the cities) - a lot of those people are looking in places like Creswell, Harrisburg and Veneta,' he said.

That's why, despite what seems like a steep entry-level price, real estate agent Mike O'Connell Jr. of Re/Max Integrity said he expects the "super cute" house he advertised last weekend to find a new owner quickly. He knows the property and its history well: O'Connell is not only the listing agent for the tidy, 950-square-foot house, but the nephew of the elderly woman who left the home recently after 35 years to move into a retirement facility.

A 90-minute open house last Sunday generated revisits by five would-be buyers the next day, O'Connell said.

"In January of 2005, this house would have sold in a day or two for about $175,000," he said on Tuesday. "Now the price is higher, and it's been on the market a week. But I'm glad the market has slowed down. It's a challenge for first-time home buyers to be able to afford a house - too many of them are paying a large part of their take-home pay for housing."

At last week's open house, those who came to look "were either families buying their first home or older people looking to downsize," O'Connell said.

"At a price of $209,900, some of them would be stretching themselves to the absolute limit," he said. "With the market the way it is, they need to ask themselves if they really should be buying a house right now."

Mortgage broker Paul VanderPlaat of Steppingstone Mortgage agrees.

"The old rule-of-thumb was not to pay more than 29 percent of gross income for housing, and not to have total debt - including housing - of more than 41 percent of gross income," VanderPlaat said. "Now many lenders are financing 100 percent of the sales price of a house, with an overall debt of 63 percent. A lot of people we talk with really can't afford a house payment, but most people just want to own something of their own."

Counting on continued price inflation that would allow homeowners to realize big profits after just a short time could lead many consumers to disaster if the market sours, and lenders have an obligation to educate home purchasers about the risks involved, he said.

"It may be the house you want and a payment you think you can handle, but because incomes haven't been keeping up with housing costs - and may not in the future - it's important to think hard about doing something less risky."

That may mean either continuing to look for a less expensive house or postponing a home purchase altogether, VanderPlaat said.