Get ready for soaring housing prices and rents in Portland 2016

Just a few hours ago, for the first time ever, the Portland Metro Council voted NO to expanding the UGB (Urban Growth Boundary) for the Portland metro area. The boundary has been expanded each time the Metro council has met since it was first established 40 years ago.

high density housingMetro counselors interviewed stated that they believe there is already enough room within the urban growth boundary to accommodate forecast growth, assuming that local governments adhere to the general plan and build an additional 123,000 housing units by 2035. The plan is that 80% of that 123,000 new units will be multi-family housing in downtown Portland, within major designated urban centers and along transportation corridors. Only 20% (24,600 units) of the new housing will be single family housing according to the master plan.

Critics are already saying that they feel this decision could lead to housing prices  soaring even more than had been forecast prior to this announcement. It is also likely to lead to higher rents in the area, though Portland already has a shortage of rental units now.  According to the most recent growth  forecasts for the next 20 years:

  • The population in the Portland metro area will increase by 400,000 people to 2.7 million;
  • The population of the city of Portland will increase by 260,000 people;
  • There will be an additional 140,000 jobs created in the city of Portland alone.

The Portland City Council will be meeting next week to try to determine how to accomplish the goals set forth in the updated Comprehensive Plan without sacrificing “livability” in the city of Portland.

Since 2012, the Portland metro area has experienced what has often been called a “home buying frenzy.” This year alone we have seen housing prices rise 10%. And according to RMLS, housing inventory dropped again in  October to only a 1.8 month supply.

The fallacy here is that the majority of home buyers prefer high density multi-family dwellings. As I have previously reported, the majority of buyers are looking for detached single family dwellings and don’t even want to look at attached dwellings, never mind condo developments. Yes, there is demand for condos and town homes, especially in the downtown areas; but this is not the preference of 80% of the population.

Neighborhoods throughout Portland are already protesting the high rate at which some of our beautiful older homes are being demolished to make way for 2-3 homes on the same property. Recently residents of Eastmoreland paid a developer $800,000 to save the land with a house he had purchased to demolish. The protest centered around his plans (which had been approved) to cut down 3 giant sequoia trees to make room for 2 houses where only one had stood among the majestic trees.

Will other neighborhoods have to fork out more money to buy back homes from developers? Just imagine how our area will change if another 30,000 houses are torn down to make room for multi-family dwellings.

But will our housing prices soar next year based on this news and the updated Comprehensive Plan for the Portland metro area? Historically, when demand exceeds supply, prices rise due to competition. Can our home buyers get any more competitive than we have seen over the last few years? Time will tell, but the forecast for 2016 is continuing low inventory and increasing home prices.

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Why year end is the best time to buy or sell a home

snow day in OregonWinter is usually the best season for home buyers

Contrary to popular belief, spring, while the busiest home buying and selling season, is not the best time to buy or sell a house.
For serious buyers, the best months are late November through year end. It’s true that there is typically less inventory to view, but more importantly, there is less competition for every property listed.

Most people become pre-occupied with the holidays, so both listing and shopping for a new house gets sidelined until after the holidays. Those buyers who are out shopping often find that sellers are as motivated to close a deal as buyers are to find a house. With fewer competing offers, you will have a better odds that your offer will be accepted.

Winter months are great for sellers too

At the same time, the winter months are great for home sellers. All too often sellers decide to wait until after the holidays to list their properties. If this is you, you are missing out on a great opportunity to get ahead of the competition.
People who want to view your home at this time are years are generally serious buyers. They want to make their decisions and know that shortly before or after the new year, they will be able to settle into their new homes while the masses are just beginning their search. Because most people are so busy, you will not have to open your house to so many lookers, and buyers will be more understanding when you tell them today at 10am is just not a good time.

 Did you know that most businesses make decisions about relocations and/or hiring during the late months of the year. In Portland, with so many businesses opening outposts here recently, we do expect to see the influx of people relocating here to continue.

  1. Homes tend to show as warm and welcoming with holiday decorations, making it easier for people to attach emotionally.
  2. Most people affected by relocations or new jobs prefer to get into their new homes prior to their start dates.
  3. According to realty company Redfin, homes listed during the months of December through February tend to sell more quickly. People looking at this time of year are looking because they need to move; not just because they want to see what’s out there that might strike their fancy.

If you are listing your house during the holidays it’s important to remember to NOT go overboard with decorating. You want buyers to see the house, and that there is room to decorate for the holidays, but not overlook those features that make the house desirable.
 

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The number 1 misconception about home financing

Typical down payments for home buyers 2015During and after the great housing crash of 2007-2008, home financing became almost impossible. Even the most qualified buyers had a  hard time getting a mortgage. At that point, in order to purchase a house, most buyers needed at least 20% down to qualify.

Unfortunately, the idea that 20% down payment is still required to purchase a house has persisted and is keeping many who would like to purchase a home on the sidelines scrambling to save that cash.

As you can see from the graphic, very few buyers actually put 20% down in 2015.  In fact, the average down payment for first time home buyer was only 4%, and even repeat buyers put down only 13%. Most buyers, even those with cash, opted to use that money to pay off debt and establish a rainy day fund.

It’s true that lending regulations remain much tougher than prior to the crash. A good credit history is still important, and with the exception of veterans and rural property buyers, 100% financing is just about impossible to find. However, financing is available with credit scores as low as 620, and as little as 3.5% down for just about anyone. Self employed buyers can sometimes even obtain a mortgage with only one year of tax returns.

Banks are flush with cash these days, and one of their favorite investments is housing. With money readily available for qualified buyers, you might check with your favorite lender, or call me for a referral to discuss the assorted lending options that are available to you.

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The wealth gap widens between home owners and renters

Increasing gap in wealth renters vs home ownersAs you can see from the graphic prepared by the NAR (National Association of Realtors), based on a survey completed by the Federal Reserve, home owners have always had a significantly higher net worth (between 31% – 46% ) than renters. This gap has been widening since the start of the economic recovery in 2010, while renters have actually seen their net worth decrease.

Of course, most of this is due to the equity that has been accumulating in their homes. This spread is forecast to continue to widen over the next few years as rents continue to rise, while home owner payments remain relatively stable. The forecast for 2016 is that home prices and values will continue to rise which will add more to home owners’ net worth and wealth.

At the same time, increasing rents will eat away more and more at individual’s wealth.

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Portland tops the charts for home price increases in July-August 2015

Portland tops charts in US home price increases summer 2015According to a report issued last week from Standard & Poor’s/Case-Shiller home price index, Portland properties increased in value 1.1%, the biggest increase in any metro area in the US. For the year, Portland property values have increased to date 9.4%, lagging behind only San Francisco and Denver at 10.7% each.

Nationally home prices increased only 4.7%, with only a .3% increase in July-August 2015.

This is great news if you already own a home, but for home buyers, a 9.4% increase since this year means a $300,000 home you could have purchased last year would now cost you $328,800.

For those thinking about selling, can this trend last? And for home buyers, are you being priced out of the market?

Mortgage rates remain very low. The Feds announced last month that they were not raising rates, but left the window open to a rate increase in December. If mortgage rates rise just .25% in the coming months, that equates to a monthly payment increase of $58.75 just for the price appreciation this year.

The housing market remains robust in Portland. While we saw a brief slowdown in purchases in September, as compared to the summer months, activity picked up again in October (final numbers will be released soon). With our inventory still way too low, no one sees anything but continuing inflation in our prices as we close out 2015 and move into 2016.

Investors cashing in on rapidly increasing home prices

The fact that property prices are skyrocketing in Portland has not escaped the notice of investors: whether purchasing property for rentals or fixers to renovate and flip, investors from around the country are buying Portland properties as quickly as they are listed.

business giants that have offices in PortlandBusinesses moving to Portland citing affordability as #1 reason

One of the factors that had kept home prices low relative to Seattle and San Francisco, was our inability to attract big businesses to Portland. This has all changed recently. According to an article in Portland Business Journal, Portland is still affordable relative to other big business locales around the country. But, “Economic development agencies statewide have been using Portland’s affordability to aggressively recruit companies from high-dollar markets.” The strategy has succeeded in attracting “Google, SalesForce.com, Airbnb and eBay, who all now have Portland offices and collectively employ more than 1,000 workers. Additionally, startups like the targeted email provider Customer.io and rental management software maker Cozy have relocated their companies from New York and San Francisco, respectively, to take advantage of Portland’s lower costs and availablity of talent.” And of course, business giants like Nike and Intel have been in Portland forever.

 

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