Rising house inventory concerns economists

Tuesday, July 17, 2007 10:56 AM PDT

PORTLAND (AP) — The median home price in the Portland area declined slightly from May to June, and area economists say that might be a preview of things to come.

Rather than the drop in price, from $297,000 in May to $295,000 in June, economists said they were more concerned about the rising inventory.

In June, the Portland market reached 5 months inventory, higher than the 4.5 months in May and almost double the 2.6 months inventory recorded in June 2006. The Regional Multiple Listing Service defines inventory as the number of months it would take to sell the homes on the market at the most recent month’s rate of sales.

There were 2,731 closed sales in June — 18.5 percent fewer than a year ago. There were 13,752 homes for sale as of July 2 — 60.4 percent more than a year ago.

‘‘The story of the last few years had been a lot of first time home buyers moving out of apartments and people who wanted to try their hand at real estate investment,’’ economist Bill Conerly of Lake Oswego told The Oregonian. ‘‘Those two groups are on the sidelines right now.’’

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The rapid escalation of house prices during the recent boom could also be a factor, as wage gains did not keep pace.

‘‘It’s the prices compared to three or four years ago — that’s what is keeping first time homebuyers out of the market,’’ said Conerly, adding that tougher lending standards and modestly rising interest rates might also stop would-be buyers from taking the plunge.

The June median price was 5.4 percent higher than the $280,000 recorded in June 2006, so the region has held onto the record-breaking price gains of early last year. But Conerly said the 12-month increase ‘‘reflects the strength of last year rather than anything that happened in the last few months.’’

Economist Jerry Johnson, of the Johnson Gardner firm in Portland, said he expects a flattening of year-to-year figures in the months ahead, in part because of the seasonally weaker second half of the year and the relatively high housing inventory.

Johnson said home builders need to cut production deeper than they have. ‘‘In the long run, you don’t want to have 5 months inventory on the market — you want three to four,’’ Johnson said.

Across the state line in Clark County, Wash., the median price in June was $265,500, down 1.6 percent from a year ago. There was 6.8 months of inventory on the market compared with 4.7 months in June 2006.

In Lane County, which includes Eugene and Springfield, the median sale price increased to $243,300, up 10 percent over the same month a year ago. But inventory is also on the rise there. There were 902 houses listed with the RMLS. The number has risen steadily since January, when just 558 properties hit the multiple listings.