Leading economist says Portland home buyers ARE at risk of being priced out of the market
Home buying has become an exasperating experience for buyers across the nation. With high demand and ever increasing prices, the fear is that before buyers can find a house that suits their needs and budgets they will be priced out of the market.
Leading economist and Nobel prize winner Robert Shiller of the S & P Case-Shiller housing price index recently wrote a column for the NY times about this very subject.
According to Shiller, unless you are trying to purchase a home in Portland or San Francisco, your fears are perhaps a little overblown. “There is reason to believe that double-digit increases won’t continue for long in individual cities,” Shiller writes. “Short-term variations abound, but for the most part, the differences in long-term home price increases in individual cities are about plus or minus one percentage point annually.”
Shiller went on to add that San Francisco and Portland are notable exceptions to the above where home prices have grown almost two percentage points above average annually since 1987. According to Shiller, the primary reason for Portland’s explosive increases in home values is the incredible population growth which demographers project will continue at least until 2050!
Migrants are NOT the only ones buying homes in Portland
Compounding the problem of too few homes for the growing population in Portland is the fact that huge investment companies are not only buying the big multi-family properties, they are also investing in single family homes too, and have found that east Portland is especially attractive because of the lower prices relative to those in the rest of the metro area.
Unlike years ago, where big investors, such as Hedge funds, insurance companies, pension funds, and the Berkshire Hathaway scale of investors were interested only in commercial properties and multi-family buildings of 100 units or more.
Big institutional investors are buying up Portland because our property values are relatively low and there are no other safe havens for the type of money they have to invest. The stock market is too rocky while bonds offer little to no returns. These investors are parking their funds where they see growth above average growth potential, and Portland is one of those markets.
“A series of reports by the nonprofit Investigate West found that Wall Street was scooping up single-family rentals in Portland by the hundreds. And where did one of the investors – Blackstone, a multinational private equity firm – raise some of its capital? Oregon’s own Public Employees Retirement System, or PERS. (Investigate West found that Blackstone had invested in more than 45,000 single-family rentals in 14 areas around the country, but not in Oregon. Another company, American Homes 4 Rent, pursued a similar strategy in Portland.)” When investors buy single family homes, they usually buy in bulk and pay cash, and so are directly competing with the average Portland home buyer.
The recent rent hikes in both housing and commercial buildings may be only the beginning of the hikes to come as these investors see current leases expiring.