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Portland Real Estate Market Poised to Outperform

When I say out-perform, I guess I should start with a definition. Out-perform what? The most common answer is price. We believe that Portland real estate prices will continue to rise, and at a pace of 1.5 to twice the historical norm. We expect that most of that appreciation in 2015 will happen between now and the middle of the summer. Sure there will be differences by neighborhood and at different price-points, and there are significant timing considerations for folks that have a home to sell and buy. If you know someone looking to make a move this year, why not put them in touch with us to receive a free consult?

A quick examination of some of the key numbers will help you understand why we expect a robust spring and summer for Portland real estate prices:

Case Shiller Composite Index

  • Although 2014 sales volume in Portland was off almost 12% in Portland, sales picked up in September and volume over the past five months is up 12%.
  • Active listings in the Portland market are at 1/2 of the average of the past 12 years.
  • With sales picking up and listing volume down, inventory is down 17%. At 3.4 months of supply it’s at roughly half the absorption rate of a balanced market.
  • The percentage of homes with negative equity (“under-water”) is down to 3.6%. If prices do what we expect this year, this percentage will drop to 2.5%. Furthermore, over 80% of homeowners have at least 20% equity in their home. The rebound in equity enables folks that have been waiting to move to do it.
  • Portland is now a destination city. A number of sources, including data from national moving companies rank Portland #1 or #2 of the cities that people are moving to. People are choosing Portland for quality of life, as their retirement city, for our climate, and now for the jobs market. Our double digit unemployment rates have dropped to 6%.
  • The millennial generation who had delayed purchasing a home (factors included student loan debt and poor job market) are now entering the housing market in earnest. One of every two millennials have been looking at homes on line over the past 6 months. Baby Boom generation is downsizing en masse and as they do so, driving up prices in new construction, single floor homes, and smaller homes.
  • First Time Homebuyers 2015 Vision Speech

  • The millennial generation who had delayed purchasing a home (factors included student loan debt and poor job market) are now entering the housing market in earnest. One of every two millennials have been looking at homes on line over the past 6 months. Baby Boom generation is downsizing en masse and as they do so, driving up prices in new construction, single floor homes, and smaller homes.First Time Homebuyers
  • Although building activity is up 2.5 times from 2010, new building permits are still running almost 1/3 lower than the pre-2008 levels.
  • Perhaps more significantly, as we look forward over the next 25 years approximately 2/3 new homes will be multi-family construction. That is the inverse of the past 50 years, where two of every three homes built were single family homes. We expect that single family homes will appreciate in price faster than the rest of the market.

  • Although down from the all-time most affordable market of 2011-2012, with rates still so low, affordability remains very high. Housing costs for the median-priced home is 15% of median household income, which is a still 25% below the historical norm of 21.6%.
    • Historical Home Prices - 2015 Vision Speech

      Comparing the US chart to the right with the chart for Portland above, you will notice that the gap to the historical trend line in Portland (8%) is less than half of the national gap. Keller Williams economists predict that home prices will parallel the historic appreciation rate of 4% per year compounded at the current gap of roughly 17% below the historical trend. In Portland we (Portland Home Team) expect that we will get back to the historical trend within the next two years. We believe that the we will make up almost half of this gap over the next six months, and then expect a leveling in the market throughout the back half of the year.

      There are a few reasons why we expect most of the pricing moves in 2015 will be realized by mid-summer. One reason is seasonal: the family home market (typically larger homes) is the most seasonal segment of the market as families plan their move to sync with the school calendar. The others are fundamental: As prices continue to rise, we expect active listings to also increase. The increase in supply should have a dampening impact on prices. The other fundamental factor is demographic: we expect the percentage of first time home buyers to increase, swelling the sales rate for less expensive homes.

      Inventory Trends - 2015 Vision Speech

      The other key demographic trend is with the baby-boom generation. Boomers are trading down to smaller, more manageable residences. This shift is helping to prop up two key segments of our market: 1) new construction, for its modern floor-plans and lower-maintenance turn-key living, and 2) one level living as boomers are looking ahead to the day when they will want to avoid climbing stairs. We expect to see new construction and one-level homes (master on main too) as being so desired that prices in these segments will also climb at faster rates than the rest of the market.

      If you would like a copy of our slide deck with charts and graphs for both the Portland real estate market, just let us know. For active buyers, sellers, and investors we will be happy to schedule a 1:1 free consult to talk about your strategy for maximizing equity and/or finding the perfect home in this market.