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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