As of the end of the first quarter of 2016, houses within the Portland city limits have soared an almost astonishing 17% over the last year (according to Zillow). Throughout the rest of the metro area home values are up approximately 13% – not quite 17%, but still a very good return on any investment these days. In many areas of Portland, housing values have hit record new highs, and just keep rising.
To make matters even worse, inventory dropped again to almost new record lows of only1.3 months (the time it takes to sell all the houses currently listed if there are no new listings). Many buyers I work with say that trying to buy a house is almost like having a second job. It is not for the faint of heart or those who are easily discouraged. Buyers need to be ready to get out and look at new listings the day it goes active because any house could be sold in just one day, often with multiple offers. And buyers need to be ready for “rejection.” It’s not unusual for buyers to make offers on many houses before they get one accepted. This is not personal folks. Money talks.
Buyers – don’t even think about a low ball offer; not in this market (unless the house has been listed longer than a week or two.) Sellers know this is their market and most are prepared to wait for the right offer to come along.
Average home values in Portland metro area hit $385,000
It’s true that the averages include the prices of homes in the highest priced areas of Portland; but this is the highest average price we have ever seen, and it’s just going higher. With big industries moving into Portland and employment on the rise, there are more buyers out there with bigger budgets helping to push prices up.
Home buyers with lower budgets should consider the suburbs
The “dreaded suburbs” has many would be buyers thinking gloom and doom. Millennials and those with larger budgets have their eyes on being close in to down town Portland and are willing and able to pay the higher prices. Just last week in the very popular Hawthorne/Belmont district there were only 3 listings.
But the suburbs aren’t the end of the world. There are some really beautiful neighborhoods outside of the I-5 corridor. With home values up at least 13% over the last year those who move to the suburbs are still making a very respectable return on their investments! Of course, it’s always possible that many of these suburban neighborhoods will sprout little boutique shopping areas too, and in time, you might find that you actually like where you were able to buy at a lower price. You get a lot more house for the money in the suburbs. Remember that the Division shopping area didn’t appear until PokPok restaurant opened and that was only 10 years ago.
Businesses are also moving to the suburbs
It’s not new that businesses are moving out from downtown Portland. Property costs are lower in the suburbs, so many big companies choose to build their campuses further out. Look at Intel, Nike, Columbia Sportswear, and all the high tech companies out in Beaverton and Hillsboro; or Xerox, Sysco Food Systems, Mentor Graphics and Flir Systems down in Wilsonville and you’ll find those suburbs are where the employees are moving to be closer to their jobs; and their housing markets are thriving too. As a lot of start ups are moving into Portland, we’re finding that many of them are also locating out in the suburbs.
At some point, housing inventory will catch up to demand, and the market will slow. That 13% return on your investment will definitely help you purchase another house, perhaps in a more desirable location if you choose to. You’re certainly not going to see that kind of return paying rent (which is also increasing at unprecedented rates of 14% per year). Buyers need to remember that a house is more than just a place to live; it’s also an investment for the future. It’s not even unforeseeable that housing prices could dip again one day. It has happened many times historically, so it could happen again.
When will the housing market craziness end? Is this just another housing bubble?
We’re hearing “bubble” everywhere, but few analysts or economists think this is a bubble. Portland property values have been lagging behind all the major metro areas on the west coast forever. It is in part why 500 people are moving to Portland every week. And of course, that high rate of migration into Portland is fueling our high demand and low housing inventory. Plus approximately 25% of all home sales are cash buyers! With all these factors in place, this housing boom was predicted. Even Forbes magazine named Portland one of the housing markets most likely to outperform this year. That prediction is certainly coming true now.
However, virtually everyone believes that the market will cool, but very likely not before 2018. It will take that long for inventory to catch up to demand. Note, that cool is the word here, not bubble bursting. Eventually the housing market will stabilize and we will retreat to more normal 3% annual home value increases. But inventory has to rise to more like 3-6 months before that will happen. For better or worse, this is our housing market now, and anyone who wants to buy a house has to play in this market. It’s quite an experience.
What about buyers with budgets of less than $300,000?
Buyers with budgets of less than $300,000 absolutely should be looking outside the inner corridor to find a home, especially if they need a house with 3 bedrooms and 2 baths. Inside the inner corridor, few homes are priced below $300,000 and most are major fixers or tear downs and often require cash buyers. But even close in to I-205, home prices are rising almost as quickly as just across the interstate. Neighborhoods like Park Rose, Maywood and Mill Park took off last year. Others further out such as Milwaukie, Gladstone and even Gresham were among the hottest selling neighborhoods in the metro area. And on the west side, Beaverton and Hillsboro are definitely hot too.
You may even find that you like living in the suburbs where there is less traffic and your money allowed you to buy a larger home than would have been possible closer in. And with the exception of the new housing developments, most Portland suburbs do not feature “every house looks the same” type of atmosphere. Most of our suburbs are a great mix of older homes, lots of mid-century style homes (which, by the way are definitely coming back into vogue), as well as newer infill homes. There are lots of quaint tree lined streets and evidence of pride of ownership further out. Stranger things have happened, and it could happen to you.