The Portland metro area saw the second-largest jump in home values in April, trailing only Seattle.
Prices jumped 1.9 percent in the Portland area in April, reaching a level 9.3 percent higher than a year earlier, according numbers from the S&P CoreLogic Case-Shiller home price index released Thursday.
The increases follow a nationwide trend of rapidly rising home prices.
Nationally, home prices rose 0.9 percent in April and are 5.5 percent higher than a year prior. The smallest annual gain reported among the 20 cities included in the index was 4.1 percent, roughly twice the rate of inflation, in New York.
But Seattle and Portland have consistently led the pack in recent years.
The ever-climbing prices come as buyers are competing over a slim supply of homes on the market. Current homeowners are staying put rather than moving up to a more expensive home.
Homebuilders, meanwhile, are still less active than they have been historically. That means fewer new homes to keep up with a growing population.
Housing market observers have long speculated a looming increase in mortgage rates could slow demand, in turn putting the brakes on home prices.
But rates have been volatile, dropping in recent weeks to their lowest point of the year.
And David M. Blitzer, chairman of the committee that publishes the Case-Shiller index, suggested Tuesday the rising rates could have the opposite effect.
“If mortgage rates, currently near 4 percent, rise further, this could deter more people from selling and keep pressure on inventories and prices,” Blitzer said in a statement. “While prices cannot rise indefinitely, there is no way to tell when rising prices and mortgage rates will force a slowdown in housing.”
In Portland, the median home-sale price was $385,000 in April, according to the Regional Multiple Listing Service. It rose to $388,000 in May.
As always, let me know if you have any questions!
The following analysis of the Oregon and Southwest Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. I hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.
- The average home price in the region rose by 9.4% year-over-year to $334,299. This is down from 10.9% in the fourth quarter of 2016.
- Jefferson County took over as the market with the strongest annual price growth, with homes selling for 30.7% above the level seen a year ago.
- All but three counties experienced rising prices when compared to the first quarter of 2016, and most of these saw significant, double-digit increases.
- Despite rising interest rates, the lack of inventory continues to drive home prices higher.
DAYS ON MARKET
- The average number of days it takes to sell a home in the region dropped by five days when compared to the first quarter of 2016, but it took 17 days longer to sell a home than in the fourth quarter of 2016.
- The average time it took to sell a home in the region was 98 days.
- In several counties, days on market rose when compared to the same period a year ago. This is not too surprising given that the counties where sales slowed are small, which often leads to erratic demand.
- Counties where homes sold the fastest were Washington and Multnomah Counties, where it took an average of 33 and 42 days respectively for homes to sell.
The speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. Economic growth in Oregon State remains impressive, and the region’s housing market clearly continues to benefit from such robust growth.
Home sales have slowed, which has taken a little steam out of the strong appreciation rates we’ve seen over the past several months. That said, the market remains remarkably tight and unlikely to shift dramatically for the duration of 2017. As such, I have moved the needle slightly more toward sellers for the first quarter.
High-end real estate brokers filed into a breakfast meeting for Windermere Real Estate’s Premier Properties program last month, eager to hear statistics and insights into a luxury market that has taken off over the last year. I had the pleasure of sharing my take on the rapidly growing market with the brokers; here’s some of the information they walked away with.
First of all, what is luxury real estate? The definition varies from region to region. In the Portland area, Windermere brokers base their luxury qualifying price on variables such as condition of the home and grounds, history of the home, architectural significance, location and more. Listing prices for luxury homes in Portland typically start between $750,000 and $1 million. To qualify for Luxury Portfolio International, a division of Leading Real Estate Companies of the World, home listings must be priced at or above $899,900.
This same group details the recent increase of luxury market activity, reporting that 25 percent of the U.S. wealthy plan to purchase luxury real estate over the next three years. Further, a whopping 45 percent of the global wealthy plan to purchase during the same period. This is already manifesting in Multnomah County — largely as a result of the increase of wealthy, international tech buyers flocking to the area — where transactions above the $1 million price mark increased 21.5 percent from 2015 to 2016 and transactions above $800,000 increased 27 percent over the same period. Among those high-end transactions, average sales prices skyrocketed nearly $50,000 over the course of the year.
I predict the luxury market will continue to increase moderately year-over-year. Further, job growth in the area should continue to support higher home prices as demand continues to exceed supply. Average listing prices on luxury homes in Portland are reaching $900,550 — well short of other major markets in the west, such as Seattle, San Francisco, Los Angeles and Salt Lake City. With home prices expected to increase 7.9 percent in Multnomah County over the next year, now is a great time for buyers to enter the luxury market and watch their investments quickly appreciate.
Some may fear that all of this increased market activity signals a housing bubble, but I would be quick to dispel that apprehension. Housing prices continue to increase, but home values are protected by controlled national mortgage debt. This total has only jumped one percent since 2012, even when paired with the surge in home price growth. Stringent credit requirements also signal the absence of a bubble. In 2008, the loan qualifying process was fast and easy, but now banks are lending much more conservatively. So I would turn away from the fear of a bubble forming, but perhaps keep an eye on Portland’s housing affordability and accessibility.
The uptick in luxury market transactions is encouraging, but we want to make sure the average Joe can continue to afford real estate as well. While home prices begin to climb, they still vastly outpace income growth. As a result, average Portlanders are having a tougher time affording housing near their workplaces. Since businesses pay close attention to how much it will cost their employees to live in a given market, I worry that high housing costs could price Portland out of business.
There is much for Portland’s housing market to look forward to as we head into the summer months. The luxury market is inspiring for buyers who want to make a high-end purchase soon. However, they’d better hustle before the near-eight percent value increases set in. While I am encouraged to see that we are not on the verge of a housing bubble, we must be wary of housing affordability or risk the chance of Portland experiencing a stall in economic growth. With any luck, Portland will meet its continued expansion head on.
As always, let me know if you have any questions!
Summary: Claire Anderson of Portland has a well-paying job at a local nonprofit, and she’s socked away thousands of dollars, but she still can’t find a home to buy in her price range. Portland’s stock of homes affordable to moderate-income first-time buyers is disappearing amid rising prices that have outpaced wages. April 18, 2017 Beth Nakamura/Staff
Though it seemed unlikely, Claire Anderson couldn’t shake the notion her real-estate broker had taken her to the scene of some terrible crime.
They’d crossed an unkempt yard to enter the rundown Southeast Portland home through a back door. Inside, splotches covered the walls and ceiling. The lights flickered gloomily.
“It was the creepiest horror scene,” the 29-year-old said. But “we still walked around and talked about what we could do to make this horror movie house work.”
That’s because after touring more than a dozen homes and trawling hundreds of others online, she could no longer automatically dismiss a house with an “Enter at your own risk” sign tacked to the front door. Not for her first home, and certainly not one within her price range.
The starter home has become an endangered species in Portland’s robust real estate market — even for middle-income earners with decent savings like Anderson.
Inventory in the ballpark of $300,000 is rapidly disappearing as prices far outpace wages, a scenario exacerbated by the continuing fallout of a homebuilding drought, the region’s surging population and the tendency of current homeowners to stay put instead of move up.
And rising interest rates threaten to further erode buying power, leaving first-time home buyers with even fewer options.
More competition, fewer homes
Portland has long held strong appeal for its relatively low cost of living — a West Coast outpost without Seattle- or San Francisco-level rents, where artists, entrepreneurs and working-class people could build a life and perhaps buy a home.
But homeownership has increasingly become out of reach in the metro area. Data from the real-estate firm Zillow show just 61 percent of today’s housing stock is affordable for median-income earners — around $64,000 today — compared with 76 percent in 2000.
That would put today’s share of affordable homes near levels last seen before the housing bubble collapsed in 2007-2008, and ushered in a wave of foreclosures and the financial crisis.
But today’s unaffordability is driven by a shortage of homes, both for sale and for rent. There’s also been far less construction of new homes as developers work to bring more rental units online.
Flash sales and bidding wars are no longer anomalies in the metro area, in large part because there simply isn’t much to choose from. A mere 3,300 homes were listed at the end of February, according to the Regional Multiple Listing Service, or a six-week supply based on current trends. A more typical market would have a six-month supply.
Homeowners, seeing little reason to subject themselves to the stress and expense, are loath to re-enter the market
“People are buying their ‘starter home’ and living there forever,” said Alyssa Isenstein Krueger, a broker with Living Room Realty in Portland. “They don’t see themselves as being able to make the leap to the next level, so there’s less turnover.”
As a result, small homes in desirable neighborhoods are seeing prices bid higher. In many cases, first-time buyers are competing with investors, flippers, developers and other cash buyers.
Home sellers usually will opt for the cash offer, which promises certainty that someone in need of a mortgage can’t provide. And developers often bid more than the house is worth because the bigger one they plan to replace it with will fetch a much higher price.
As a result, first-time homebuyers are looking farther from the city core to find affordability and less competition.
The Portland Housing Center, a nonprofit that works with first-time homebuyers, has sought to meet that need with new satellite offices in Beaverton and Vancouver.
“For a while the suburbs were the place to go,” said Felicia Tripp, the center’s deputy director. “But the inventory shortage is Portland metro-wide. It’s going to be difficult, even in the suburbs.”
Rising mortgage rates
What starter homes are available, however, remain within reach only because of low mortgage rates, which can dramatically affect monthly payments. But mortgage rates have been creeping higher. In March, the Federal Reserve raised its benchmark rate for only the third time since the Great Recession, and most observers expect the central bank to raise rates at least two more times this year.
Should rates rise to 2006 levels — about 2 percentage points higher than today — the share of affordable homes would drop to just 41 percent, the Zillow data show. Such a jump could add nearly $300 to the monthly payment on a $300,000 home, and that’s without any increase in price.
Most forecasts call for a more modest rate increase over the next two years, but prices are expected to keep growing. The median Portland-area home price jumped 10.4 percent in March, year over year, and has surged nearly 72 percent since 2012, RMLS data show.
Such a dearth of starter homes is something the Portland real-estate market has never seen before, Tripp said.
“We’re bracing,” she said. “There’s always been, generationally, a market for first-time homebuyers. This is new to us.”
Anderson, the would-be homeowner, considers herself relatively lucky.
She has a job at a Portland nonprofit that pays well enough, and her rent held steady long enough that she could save up a healthy down payment. Her family can also contribute — increasingly the norm for first-time homebuyers.
And there’s no big rush, such as an expiring lease. But her relatively low rent recently jumped $200 a month, and the prospect of future increases might force her to find a different line of work, or leave Portland.
“It may be that I don’t find anything. Then we rent as long as we can, and then,” she said, “I don’t know.”
If you own your home, you’re wondering how Portland’s skyrocketing sales are impacting the value of your place. If you don’t yet have a mortgage, but hope to, you may want to figure out which neighborhoods will take off this year.
No one can predict the future, especially when it comes to real estate investments, including sentimental properties such as your family home. But the data czars at Zillow crunched numbers at our request and came up with a ranking of what they predict could be the hottest Portland neighborhoods over the next year.
They compiled the current median home value of each neighborhood, forecast the value in a year and calculated the percent of the increase. For example, the median home in the Southwest Hills could cost 3.8 percent more over the next year, bumping the cost up more than $36,000.
Topping the list with a predicted 5.2 percent jump: St. Johns (expect to pay a median extra of $17,539), Mount Scott ($18,412 more) and Brentwood-Darlington ($15,634 more). See other predictions on how homes in specific neighborhoods might appreciate.
As public policy goes, the state’s home-mortgage interest deduction that helps shrink Oregonians’ tax bills flunks the test of public benefit.
The practice, which allows homeowners to deduct the amount of annual interest they pay to mortgage lenders, will cost Oregon nearly $500 million in lost revenue this year. The subsidy largely benefits higher-income tax filers who are more likely to itemize their deductions and who are the ones securing larger mortgages in the first place. Renters, who arguably pay property taxes just as homeowners do through their rent payments, get no similar benefit.
It’s irrational, and several states, including Massachusetts, New Jersey and Ohio, don’t allow taxpayers to deduct it in computing their taxable income for state purposes. But will legislators have the stomach to revise this practice?
The bill calls for capping the amount of mortgage interest that someone can deduct on their state tax returns to $15,000. That’s well above the average deduction claimed by the nearly 500,000 filers who submitted itemized returns in 2013, according to the Oregon Department of Revenue’s most recent tax expenditure report. It also calls for eliminating entirely the deduction on second homes. In addition, anyone whose adjusted gross income is $100,000 or more (or joint filers earning $200,000 or more) would not be allowed to claim any mortgage interest deduction for state tax purposes. The proposed changes would not apply to the mortgage interest deduction on the federal level.
The Legislative Revenue Office has not yet analyzed the proposal. But the Oregon Center for Public Policy, one of the members of the coalition that developed the proposal, estimates it could bring upwards of $200 million or more per biennium for the state, Juan Carlos Ordonez, spokesman for the center, told The Oregonian/OregonLive Editorial Board. That money would then fund assistance for down payments, initiatives to build starter homes and other programs that increase the supply of housing, said Jes Larson of the Welcome Home coalition, another member organization of the network behind HB 2006. Addressing supply is key – there is no way to legislate our way out of this housing crisis if nothing is done to significantly increase the inventory of places for people to live.
That said, this bill is far from perfect. The revenue office’s vetting could change some of the projections. And other provisions, such as the arbitrary $100,000/$200,000 income cut off could be problematic. While Ordonez maintains that six-figure Oregonians can easily absorb the hit, his conclusion seems driven by assumptions that anyone of that income level is immune to financial strain and can adapt in a heartbeat. Good public policy calls for objective consideration of how best to limit fallout when longstanding rules suddenly change.
Yes, mortgage interest deductions are a form of welfare for the better off. But the threat of immediately revoking it from people who may have based significant financial decisions on the promise, is bound to trigger unintended consequences. Not the least of which might be sparking opposition from those who might otherwise support the $15,000 cap. And this proposal needs all the support it can muster.
Legislators also must recognize the multi-faceted budget disaster that Oregon faces. While the mortgage interest deduction is a worthwhile debate, they must also confront thornier issues as easing the public-pension burden on public employers and raising new revenue from businesses.
Oregonians can be stubbornly protective of irrational, nonsensical policies that mask their destructiveness with short-term sweeteners (see: personal kicker rebate). That does not give legislators a pass on addressing it, however, particularly when the state faces a $1.6 billion budget deficit. Start the work toward a saner system, pair it with real change on pension reform and corporate taxation, and show Oregon what true leadership and progress looks like.
Let me know if you have any questions!
– From The Oregonian/OregonLive Editorial Board
Happy Wednesday, Folks!
The National Association of Realtors® recently published their annual profile of home buyers and sellers. This report provides insights into the unique buyer/seller experience from YOUR perspective, as well as emerging trends. It covers information on demographics, housing characteristics and the experience of consumers in our housing market.
While I am not allowed to share the 144-page report in its entirety, here is a great overview that provides some helpful highlights.
Let me know if you have any questions!
Can you guess?
We sure do love historical statistics that prove how amazing an investment real estate can be.
It’s our sincerest belief that every family in America who otherwise saves for retirement should also consider owning a rental property….and the historical statistics sure do seem to support this belief.
Below is a link to the Portland median selling price back to 1960. Check out what happens reliably every decade for the last 56+ years. Also consider that at the end of every decade (just like some of our clients now), there were most likely those who believed prices had moved up so much in the last decade that they couldn’t possibly increase in the future.
Boy were they wrong!
Want to know how much YOUR home is worth? I’m simply an email or phone call away.
Dear Clients and Friends,
Thanks to continued support, the Windermere Foundation has raised over $33 million in total donations since 1989. These donations have helped us support many local non-profit organizations over the years, which provide services to low-income and homeless families. Organizations like Project 150, which provides food, clothing, school supplies, and scholarships to homeless, displaced, and disadvantaged high school students, to help them stay in school and graduate.
“Thomas” was going to graduate high school with honors, but wasn’t planning to walk at graduation because he didn’t have a cap and gown. He had been living in a weekly-stay motel with his two younger siblings for six months, after their mother left them. With funding from the Windermere Foundation, Thomas, along with 40 other students, received a cap and gown and other needed supplies through Project 150, and was able to walk at graduation with his classmates.
Although the Windermere Foundation has helped many families have their most basic needs met this year, many more children and families in our communities still need your help.
There are only five days left in this season of giving to make a special gift to the Windermere Foundation. Any gift received before December 31 will be counted towards the 2016 tax year. More importantly, your gift will directly help local children and families in need.
Can I count on you to make a gift today?
100% of your gift will be used to help people in your community. In doing so, you will provide additional life-changing help to the same organizations that your office already supports.
Your financial gifts to the Windermere Foundation truly make a difference in the lives of others.
Make a gift today online or by mail to Windermere Foundation, 5424 Sand Point Way NE, Seattle, WA 98105. If sending your gift in by mail, it must be postmarked by December 31 in order to be counted towards this tax year.
Thank you for your generosity and compassion.
It’s of course just a vision at this point, but what the Zidell family and its team of designers and planners have conjured up for their 33 acres of property is, to say the least, expansive, sweeping and head-turning.
Renderings that are part of a recently completed master plan — all conceptual at this point — show a bustling riverfront in the shadow of gleaming new office and residential towers. Public plazas and restaurants teem with people, OHSU’s tram soars overhead and elements of the property’s former use as a barge-building and ship-dismantling facility tie in with the new development all around.
And, in what could be the most intriguing image of the lot, the former slip where Zidell for decades launched its giant barges into the river, gets transformed into a public river access point, where paddlers launch kayaks and canoes, sunbathers take in the rays and swimmers plunge into the water of the river and a cordoned off pool.
“It’s a great access point for the river and a great opportunity that just hasn’t been there before,” said Tom Henneberry, chief operations officer for ZRZ Realty, the real estate arm of the Zidell family’s company.
ZRZ was scheduled to go before the Portland Design Commission today for an initial preview of the Zidell Yards master plan, which has been in the works for the bulk of this year. Inclement weather postponed that meeting, but Henneberry provided a snapshot of the plan, including the renderings, to the Business Journal.
The grand vision for the Zidells’ 33 acres could, at full build-out, bring in 15 to 20 new buildings and up to 5 million square feet of mixed-use space, including residential, office, retail and a hotel. That square footage would also include more than nine acres of public park and open space, much of it designed to offer a closer connection with the Willamette River.
“We are all about activating the river and getting people used to getting a little closer to it,” Henneberry said.
The master plan envisions 1.5 million square feet of office space, 2,600 residential units and about 250,000 square feet of retail and restaurant space. One building would be anchored by a grocery store, an amenity that’s long been missing from the South Waterfront mix. The plan also includes some 5,500 parking spaces and four parks — including one under the Ross Island Bridge — as well as more of the existing greenway along the river.
The plan also includes infrastructure projects, including road extensions, that would be required to bring some of the development to fruition.
Much of the design thus far has been done by GBD Architects, PLACE Landscape Studio and Moffatt & Nichol.
Henneberry said that Zidell Marine is on track to complete its final barge on the property by the beginning of June. After that, early infrastructure construction could begin in the later part of 2017, followed by potential office or mixed-use projects breaking ground by late 2017 or early 2018 depending upon the array of normal development variables.