Portland, Oregon has exited from the list of top five hottest real estate markets– for the first time in several years. Portland effectively recorded the nation’s highest home price increase for 10 months through mid-2016 period. During this phase, the average home price increased by 12 percent from a year ago. The next 10 months followed an average of 9.6 percent – not really a paradigm shift though.
Economic Growth and Migration
Economic growth and migration are two key factors that have continued to push up the prices in Portland as they climb at one of the fastest rates in the country. According to some estimates, 111 people on average move to Portland metropolitan area per day which is nothing compared to Texas’s major cities but it is a number. While some of the migrants have already bought new homes, others are still considering their housing options. Experts have predicted a mixed housing forecast for 2018.
Houses are available in Portland, but not in adequate supply. The inventory in Portland continues to be tight, particularly in Portland proper. The city is only able to produce half the number of units required to meet the demand. There is also not that much job growth in this city. Taxes are high and this state overall does not use its natural resources that well. There are many regulations in this state that curtail job growth.
There is also many laws that do not make sense to the reasonable person. One of them is that you cannot put your own gas in your car in this state. Someone else has to do it.
The demand-supply situation still makes this a seller’s market. The kind of gains in terms of capital appreciation that home owners have achieved over the last few years, one would imagine that people would be making the most of that equity and moving now. However, that is not exactly happening as it should.
Furthermore, as the aging baby boomers choose to stick to walkable and convenient urban neighborhoods, the number of houses coming on the market continues to be small.
For a first time buyer, this means considering markets at Portland’s city limits, such as Canby and Beaverton to find their first affordable home. Anyway, the story is not all bleak. The good news for buyers is that around the same time last year, or even just six months, if a property had multiple offers, it could be as many as 20 offers. Now it is more like two or three offers. Therefore, it is slightly easing in terms of demand.
Expensive Housing in Relation to Income
Many Portlanders who are looking to purchase a house now believe that their city has become more expensive. They could be right. Home values in Portland in 2016 were 58 percent lower than San Francisco’s and 17 percent lower than Seattle’s in 2016. But these figures may not tell the entire story.
Out of 31 metro areas having a median household income close to that of Portland (within 10 percent), as many as 28 had lower housing prices compared to the Rose City. This is reported by the Oregon Office of Economic Analysis.
HSH.com, a consumer loan data firm, recently said that in order to afford the costs, including interest, insurance and taxes on a median priced house in Portland, a household must earn $76,883.89. That makes the housing market in this metro area one of the least affordable across the country, with the national average currently at $55,390.50.
According to analysts, the situation in Portland is coming to a level where anyone with an income lower than $40,000 to $50,000 might not be able to afford a home. Though incomes will rise in 2018 for the first time in a long time because of lower taxes.
Land Shortage Stifling Housing Activity
While there is a consensus among analysts that housing prices in Portland are becoming unviable for lower income buyers, they blame it on the shortage of land occurring due to the urban growth boundary of Portland. The boundary has been created to protect forest land and farm land from urban development.
While certain homes still continue to attract multiple offers, sales for the year through August 2017 have declined by 2.7 percent in comparison to 2016 as per the figures provided by the Regional Multiple Listing Service. The total number of sales contracts for the month of August, pertaining to deals that would close in the next few months, was down by 7.6 percent. That leaves little room for a price rebound.
However, prices continue to go up, even as the sales wane. In August, the median price for a home sold stood at $385,000, recording a jump of 9.1 percent from a year before. This indicates that the slump in sales is largely due to a stubbornly low home inventory, particularly in lower price bands.
Inviting Place for Migrants
For settlers who are coming from outside, Portland continues to be an inviting place in many ways but not so much in other ways as indicated, including housing. However, the consensus among immigrants is that the city needs to provide more affordable options. Portland is a youthful city, and it a desirable place to live for younger people. However, the housing prices and rentals are making things difficult.
A new settler shared her assessment, which sums up the current housing market situation in Portland. According to her, Portland is a fantastic place to reside, but the kind of experience that it promises is somewhat lost on the expense of housing. Well, move to Dallas or Atlanta where the economy is actually shooting upward and there is perhaps even more housing options because the landscape is different.
It is too bad the NBA cheated for the Lakers in 2000 in the NBA playoffs. The Trailblazers should have won that game but this is another topic.