Bidding contests for home buyers in Portland are getting insane. Just this past week, 25 prospective buyers bid on a starter home in the Creston-Kenilworth neighborhood, located in inner southeast–north of Reed College and south of Powell Blvd. The sellers and their agents presented the home perfectly to the marketplace and got a winning offer about 20% over list price. Incredibly, that’s 67% above the sellers’ original purchase price three years ago.
In terms of square footage, this house sold for roughly $360 per square foot. With approximately one-third of the home being an unfinished basement, accessible only from the outside, the price per square foot of the interior of the home then was nearly $550. Unbelievable! You’d think this home was in a high-end neighborhood like the Pearl, Alameda, Laurelhurst, or Eastmoreland. Although home sales in Creston Kenilworth have been brisk over the past 2 years, they usually average at a modest $175 per square foot, an increase of 17% from two years ago.
So how can we explain these conditions and unusually high premiums? Check this out…
Chart of Active Portland Listings and Closed Sales History
This chart shows how drastically the active listing inventory in Portland has dropped over the last seven years. Inventory for April 2015 is 20% below April 2014 and 43% below the level of 2012. Active listings are a scarce resource. No wonder the median price has jumped from $225,000 to $301,300 in three years. Yup, that’s an increase of 34%!
What’s the deal?! Is our tight inventory a function of more buyers? Fewer sellers? Or both? Some more data…
Chart of Seasonal Portland Listing and Sales Trends 2013-2015 (Click to see a larger image)
Here we see demand is up. Way up! It’s the reason our current inventory is depleting so rapidly. New listings are following the trend of the past two years, where buyers are most active in the spring and remain active through summer. This is peak season for sellers. In Portland, the typical spring peak for new sale contracts has been roughly 3,000 per month. This year, April posted 3,613 pending sales, and we’re still trending up. Pending sales rates have posted double digit gains (y/y) for eight months in a row. Our average gain this period has been 22%.
Contrast that with pricing gains–a modest 6% in comparison. In 2013, prices rose 15%, even though we had the same magnitude of sales growth and inventory depletion. Our experience in the marketplace, including what we saw with the starter home in Creston-Kenilworth, suggests that prices will be rapidly catching up with the rise in demand and the corresponding drop in inventory.
What do these dramatic changes mean for homeowners? Well, there could be huge opportunities for people who navigate this market well. If your current home needs repair and you’re looking to sell, this could be the ideal market. If you’re looking to enter the market, you’ll need to act boldly and be disciplined. Timing matters. And you’ll want to focus on terms rather than just on price.
The Portland Home Team are Portland natives who love their home town and know the market better than anyone. Trust them to help you find your dream Portland home!
– Portland Home Team: Experience. Excellence.