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lending is that only borrowers with minimal credit ratings (less than 620) sign on to these higher-rate, greater-risk loans. But recent statistical findings show even homebuyers with high credit scores and the ability to put money down, were pulled in by offers of quick approval and larger houses often agreeing to pay prices far exceeding the buyer's debt-to-income ratios (DTI).

For example, the San Francisco-based research firm First American Loan Performance conducted a study in late 2006 showing a far greater number of subprime loans, up to 61 percent, went to borrowers with credit scores high enough to qualify for prime rate mortgage loans.

How this might affect Portland Metro goes back to Broadous' sweet-voiced, soothing affirmation: "Real estate is regional."

He contrasts real estate with stocks, saying "stocks are national and even worldwide; real estate is local," meaning one can judge stock values and their potential strengths and weaknesses from anywhere on the planet, from Minneapolis to Taipei, but real estate value and the strength or weakness of a market are determined by a regional dynamic.

The prevalence of borrowers holding subprime loans such as adjustable-rate mortgages (ARMs) in almost all economic strata combined with lower foreclosure levels in this part of the country puts the local real estate market in a unique position. House prices remain relatively the same in some cases even going up in the Portland Metro area in spite of a sagging U.S. economy and the tightening of criteria for home loans by new federal regulations.

As the two- to three-year period of lower, non-adjustable interest rates expires on ARMs and other subprime loans obtained mainly between 2000 and 2007 homeowners squeezed by their larger monthly mortgage payments desperately try to sell their way out of mortgages often worth more than the house.

This means those wanting to buy face higher prices and less access to money. They have plenty of houses to choose from, but are becoming more "sophisticated and demanding in what they want and are willing to offer" to the market.

The overall outcome of the subprime debacle combined with a homebuilding industry that apparently did not see it coming has caused a growing surplus of empty houses for sale on the local market as the homeowners' interest rates reset to the new, much higher level.

Despite the region's stockpile of empty houses and the relatively high stagnant prices, Broadous insists that it is a buyer's market.

"The pendulum is on the buyer's side; we're in a buyer's market as much as the loans will let that happen," he says. "Banks might be in the situation where they're having to forgive some debt." In Realtor speak this is called a "third party approval." The seller can negotiate the deal with a potential buyer, but she can't make the final decision. That is up to the lending bank.

He sees the problems affecting the U.S. real estate market as a tidal wave that started elsewhere and has petered out as it got to this region. "We're seeing some foreclosures; we're seeing some short sales, but our market time is less, our inventory is less than other parts of the country," he says. "We might have 12 months inventory on the market compared to 36 months inventory elsewhere."

Learn more about this author, K Shawn Edgar.
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