Today we’re going to talk about what’s happening with real estate in Eugene.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: We’ve been heading towards a conversation in regards to the market today. In residential real estate, we still have a supply side problem, a challenge, and it’s difficult to see how that chain is going to change in the future, because building a home that’s affordable and accessible to meet the demand with some more supply is not likely, at least not within the boundaries of Eugene.
Bob Nelson: Well, it’s interesting because as we think in terms of building a home, the cost of the land is going up, system development charges are going up and that’s an expense that didn’t exist a number of years ago. So it’s not just building a home, it’s like flushing a whole bunch of money down the toilet before you even get the building permit and then you build a home.
Marcia Edwards: Permits can be close to 10-to-12,000 and then the service development charges in addition to that, or the infrastructure for utilities can get you to 25-to-30,000 easily on single-family in in the city of Eugene. It is significant.
Bob Nelson: So if I paid $30,000, what do I have? The bare lot, right?
Marcia Edwards: You have the ability to build.
Bob Nelson: Yeah.
Marcia Edwards: You haven’t started building. You’re shovel ready.
Bob Nelson: I haven’t started yet, I didn’t go yet, but I am down 30K.
Marcia Edwards: That’s right, and I think it’s interesting because what we’ve got is we’ve got an extreme supply side problem. The absorption rate, that is if we continue to sell at the rate we’re selling, when would we get rid of all the inventory standing today, it was 1.3 months of inventory. Now a healthy market would be four to six months inventory.
Bob Nelson: Okay, now wait a minute. Let’s stop here for just a second. If we sold at the same rate that we’re selling today and no other listings are taken, when are we out of inventory?
Marcia Edwards: 1.3 months.
Bob Nelson: Okay, that’s not long. That’s not long at all.
Marcia Edwards: Especially when economists define a balanced inventory. Our supply side absorption rate situation would be four to six months, so that means that if it’s less than four months supply, you’ve got a strong seller’s market. If it’s over six months supply, you’ve got strong buyer’s market. We’ve got an extremely strong sellers market in this circumstance.
Bob Nelson: It is interesting and as I see it, there’s some changes that have occurred that are going to bolster that. As an example with the tenant protection act, I’m seeing a number of properties that were rentals being converted. Duplexes as an example, being converted to owner occupancy. Now that’s less tenancy, that’s what’s happening and I should unforeseen consequence of the tenant protection act.
Marcia Edwards: Well, we’ll take the inventory. We need inventory at that price point.
Bob Nelson: Yes.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.