PORTLAND, OR - Although the crystal balls of Portland metro multifamily housing investment analysts reveal mixed outlooks for 2009, they possess the same themes: condominium inventory is too high, apartment construction is nearly nonexistent, and growing unemployment is a given. Economist John Mitchell, speaking to a group of apartment investors at a Hagerman Frick O'Brien investors' roundtable in Portland last week, said the current recession, which he said is in its 13th month, would likely be the worst since the Great Depression.
But context is required to understand the significance of that, he said: the Great Depression lasted 43 months; the second-longest period of recessionary activity happened in the early 1980s, and lasted for a comparatively brief 16 months. "If you're an economist, it doesn't get any better than this," Mitchell said, because there are so many varying factors to look at.
Nonetheless, there is also a sense of hope attached to the coming year. On New Year's Eve, apartment appraiser Mark Barry returned home, relaxed, poured a drink, held it up and said, "Thank God it's over." Last year was among the toughest setbacks he's encountered. Barry sees a continuing slowdown in 2009, with apartment vacancies resting at about 5 percent and with the construction of between 2,500 and 3,500 new units in 2009, primarily in Multnomah County. "The urban market has held up pretty well," he said.
But Gary Winkler and Beth Dupont, brokers for Colliers International, don't think there's anything to cheer. "I don't know why people are saying, 'Thank God 2008 is over,' " Winkler said. "In 2009, people will go down." Absorption of condominiums will continue to slow, Dupont said, while converted condos will be slow to lease because they will invariably be overpriced.
Winkler questioned whether developers are deceiving themselves about the future. The jobless rate rose by roughly 3 percent between 2007 and 2008, to where it's currently hovering around 8 percent. And analysts say it could peak at more than 9 percent in 2009. "If unemployment is that high (in a place like Portland), how could you afford to live here?" Winkler said. "People don't come to Portland for jobs; they come here because it's a lifestyle choice."
Barry doesn't discount that notion. He said the condominium market is "essentially dead," and estimated it will take between two and three years to lease the inventory. Dupont agreed. "If they sell six units a month, then they think they're doing well," she added.
Mitchell said the lessons learned during the current recession will likely shape actions for generations to come. "In the last year you've seen people, without having a gun placed to their head, loan money to the federal government with zero percent interest," Mitchell said. "Why would you lend to somebody at zero percent interest? Because you're scared to death."
Source: djcOregon.com