An editorial published in the Eugene-Register Guard, Sept. 17, 2007

According to U.S. Census data, housing prices have increased more steeply in Oregon than anywhere in the United States except the District of Columbia - 254 percent since 1990. After such a fast run-up, a slump would seem destined to follow. Yet Oregon's housing market remains among the nation's healthiest. That's because, as real estate agents say, all housing markets are local - and Oregon's market is influenced by a number of unique factors.

The Census Bureau reports that the median price of a house in Oregon rose to $236,600 in 2006 from $66,800 in 1990. The median is the price at which half the houses sold for more and half sold for less.

Normally, conversations about Oregon real estate pause at this moment for expressions of regret for not having scooped up houses by the armload in the 1980s.

But that $66,800 median price in 1990 is revealing. In 1990, Oregon was still recovering from a traumatic recession. In some years of the 1980s, property values declined and the state lost population. As the recessionary clouds began to clear, Oregon's median house price ranked 27th in the nation. The median house price in Portland was low not just in comparison to the perennial hot spots in California and the Northeast, but also lower than in such cities as Chicago, Detroit, Birmingham, Ala., and Indianapolis, Ind. In retrospect, investing in Oregon real estate in 1990 looks like a sure bet - but at the time it took a degree of confidence that was far from widespread.

Housing in Oregon could post spectacular increases partly because prices had so far to climb. By 2004, even after the biggest percentage gain of any state over a 16-year period, Oregon's median house price ranked ninth in the nation. The median price in Portland approached $300,000, double the median in some cities it trailed in 1990. In the second quarter of 2007, the median price in the Eugene-Springfield area rose to $240,900 - up 5.8 percent from the same quarter in 2006, according to the National Association of Realtors. This occurred at a time when housing prices in most parts of the nation were stagnant or falling.

Oregon real estate, however, still looks inexpensive to people living in any major market in California. Prices are flat in San Diego and Orange County, but the median house there still costs more than $600,000 and $725,000, respectively. Prices are still rising in San Francisco and San Jose - and in each of those cities, the median price is more than three times the Oregon median. Oregon's real estate market has long been influenced by California bargain-hunters looking north, and the disparity remains.

Moreover, the sales price of a house is not the only factor affecting buyers. Property taxes are usually rolled into monthly mortgage payments. In 1990, Oregon voters approved a ballot measure to reduce and limit property taxes. The property-tax component of the cost of home ownership fell, leaving buyers able to afford to pay more for real estate. Prices were able to rise in response.

Interest rates have been an even bigger factor. In 1990, the average mortgage rate was just over 10 percent. By 2004, the nation's median house price had more than doubled, but the average interest rate had fallen below 6 percent - so the doubling in price resulted in an increase of only 40 percent in mortgage payments for principal and interest. With the decline in interest rates came a proliferation of lending instruments aimed at keeping housing within buyers' reach. Some of these entailed risks to buyers, particularly when they assumed a continued increasein home values. Oregon has had relatively few of these high-risk mortgages, leaving the state's real estate market with less exposure to the problems of delinquencies and foreclosures.

At some point, however, the price of real estate is constrained by people's ability to afford it. Without increases in income, housing prices can't continue rising forever, not even in Oregon. The housing affordability index, the ratio of the median house price to the median income, has nearly doubled in the Eugene-Springfield area since 1990 - a house that cost 2.9 times the average income in 1990 income cost 5.5 times the average income in 2006. The 1990 figure was low by historical standards, but the 2006 figure was high.

Oregon may be fortunate enough to escape the worst of the housing market's current turmoil, but the best news for the local real estate market would be a period in which incomes rise faster than housing prices.