Portland’s explosive housing market grabs more headlines
If you’ve been watching and reading the news lately, you would have noticed that the Portland real estate is in the headlines. The state of our housing market has been featured in The Oregonian, on national news and there was even an article in CNN Money published on February 5, 2016 asking “Who’s to blame for Portland’s soaring home prices?”
According to the report in CNN, “Everyone wants to move to Portland, Oregon. But the more popular it gets, the less affordable it becomes.” Portland was the fastest growing city in the country in 2015, and appears to be on pace to top the charts again in 2016.
Anyone currently shopping for a home in Portland already knows how crazy our housing market is. As in 2015, the normal slow-down of home buyers never happened during the holidays, and January again broke records for number of home sales. In fact, sales were up 25.9% over number of sales for January 2015, and posted the most January sales ever since RMLS began keeping records in 1992.
Sellers are still receiving multiple offers and homes are almost always selling for more than list price. Eighteen to twenty offers on a home are not uncommon.
According to KATU, in a news report last night, buyers who offer $20,000 above list price often find themselves outbid. In fact, we have seen houses sell for as much as $150,000 higher than list price in the last year or so in the most popular neighborhoods.
According to RMLS, the average price for houses in Portland as of the end of January 2016 was $355,700, up from $333,400 as of end of January 2015.
Are prices soaring everywhere in the Portland metro area?
Yes, but of course some neighborhoods are hotter than others. According to Zillow, the three hottest areas in Portland so far in 2016 are St. Johns, Woodlawn (Dekum Triangle) and Parkrose.
Other sources say that the hottest neighborhoods are St. Johns, Hawthorne, and inner NE Portland (west of I-205).
Regardless of which neighborhoods are in fact the very hottest, what we know is buyers searching for homes anywhere west of I-205 should expect high demand and unfortunately bidding wars. Since prices anywhere west of I-205 tend to run from $300,000 and up, buyers in lower price ranges are being forced to look further east, so homes sales anywhere west of 130th are now booming too; the closer in to downtown, the hotter the neighborhoods.
So, who’s to blame for Portland’s soaring house prices?
There are many reasons for what’s going on in this area, but following are some of the primary reasons housing prices continue to rise so quickly:
- Supply and demand. There simply aren’t enough homes available for the number of buyers. At the end of 2015, inventory dropped to just 1.2 months (if all listed homes sold with no new listings added, the supply would be gone in 1.2 months). That number did rise to 1.8 months as of the end of January, but we’re not even into the spring months yet; typically when the majority of buyers are out shopping.
- Migration to Portland. New migration numbers show that there are now approximately 500 new migrants arriving in Portland every week!
- Employment opportunities paying high wages. Many of the migrants arriving in Portland are being moved here by their employers, often at the same salaries they were being paid in areas such as San Francisco or Silicon Valley. This gives these migrants much greater buying power than the typical Portland resident.
- 25% of all buyers pay cash. This is especially true with migrants being moved for jobs, and those buyers coming in from California and other areas of the country with even higher housing prices. (The median price of a house in San Francisco is $1.1 million!)
- Developers are buying properties in the most high in demand locations at premium prices. They tear down the existing homes, especially if those homes are on larger lots or are in need of updating. Then they build two, three or even more higher priced homes on the same lot. Most buyers can’t compete with the price developers are willing to pay and the developers know even if they pay more for the property, they will reap in the profits on the multiple homes they construct.
- Low mortgage rates are enabling buyers to qualify for increasingly higher prices.
How can anyone win the bid for a house in Portland these days?
As realtors, we know how busy the market is. We try to get our buyers out to view new listings the same day they go live on our multiple listing service because sellers often receive several offers the first day. Most of us do try to stay in touch with the listing agent to determine how many offers are on the table and when the seller will be reviewing them. (Most sellers know that leaving their properties on the market for at least one weekend will maximize the number of offers and selling price.) This gives us a sense of how high offers might go on these listings, so we can better advise you when preparing your offers.
Here are some tips that might help:
- If at all possible, look at homes considerably lower priced than what you can afford to pay so you have room to increase your offer and still qualify.
- Be prepared to look outside your preferred area to cut down on the competition. Currently virtually anywhere west of I-205 is in high demand, and prices are much higher as well.
- Don’t automatically reject houses that are in need of cosmetic updates. Most buyers; and especially those who can afford to bid high or who insist on the neighborhoods in highest demand will make the highest offers on “move in ready” homes.
- If you are willing to paint, upgrade appliances, kitchens, bathrooms and flooring, you have a much better opportunity to win the bid. AND the upside to this is you will actually pay less after updates than you would have paid for the same house if it had already been updated by the previous seller or a house flipper. New construction properties also sell at premiums relative to comparable homes, sometimes just a few years old.
If you find yourself in a bidding war, you might be asked to give up some of your rights:
- It is not uncommon for winning bidders to give up the right to ask for repairs that are found during a home inspection.
- If you want or need help with closing costs, be prepared to offer an even higher price to cover that cost for the seller.
- Sellers may insist that if you win the bid, you give up your right to re-negotiate price if the appraisal comes in lower than your accepted offer.
It’s a tough market out there, but not hopeless. Many buyers last year walked away from the market in frustration; hoping this year would be better. We are already hearing that many of those buyers are regretting that decision as rents continue to rise almost as fast as housing prices. Remember, those who managed to buy last year are already building equity quickly. But the market will eventually calm down, and even return to normal.
Builders are buying up land as quickly as they can, but it takes at least two years from date of closing on land purchases to actually selling homes at those sites. At current rates of new home construction it is now estimated that our housing market should catch up to demand some time in 2017.