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Feb 01 2023

Portland home prices will keep dropping in 2023 – find out how you can make the most of the market

The housing market correction is much in the news and for good reason. In addition to sharp declines in the volume and speed of sales, we’ve also seen prices come down – for only the 3rd time in US history. But take heart. The pullback is expected to be mild compared to the Great Recession, when Portland home prices dropped 29% from peak to trough. Furthermore, every market offers chances to get ahead. Summed up in the graphic, this blog post reviews expert opinion to forecast key trends (Sections 1-3) and opportunities (Sections 4-6) in the Metro real estate market this year. Use the jump links below to skip to sections of most interest and relevance.

  1. A recession is more likely than not
  2. Prices will continue to decline
  3. Mortgage rates will also trend downward, but not to historic pandemic lows
  4. Move-up buyers – sell at a discount, buy at a bigger discount
  5. Cash downsizers – sell with a handsome total equity gain and minimize the cost of your replacement home
  6. First-time buyers – buy on a market downswing
  7. Caveats and call to action

1. A recession is more likely than not

We’ve already seen housing affordability and demand decline sharply, with last spring’s spike in mortgage interest rates coming on top of the pandemic run-up in prices. Now there’s broad consensus among economists that we face a recession in 2023 – though likely a mild one. Since spending and demand decline across the board in a recession, a downturn this year will intensify Portland’s housing market correction.

2. Prices will continue to decline

In other words, Metro area prices will keep going down for 2 reasons:

  1. Prices have not yet caught up to declines in affordability and demand to date. For example, just 19% of Metro households were able to afford the monthly payment for a home at the median sale price of $526K as of November.
  2. Housing affordability and demand will take another hit with the predicted recession.

Already down 5%, Portland Metro home prices could drop another 10% for a total decline of 15% from last May’s peak.

3. Mortgage rates will also trend downward, but not to historic pandemic lows

From their high of over 7% in the fall, mortgage rates have already come down almost 1 percentage point. Many experts think they’ll stabilize in the range of 5-6% this year. For example, the Mortgage Bankers Association predicts a 30-year fixed rate of 5.6% by Q2.

Much as would-be buyers may hope for a return to the 3% range, experts believe that’s unlikely any time soon. We saw historic lows in the past few years as an indirect result of the Federal Reserve Board’s steps to support the economy in a unique crisis, the Covid-19 pandemic.

Now inflation is the challenge. With aggressive interest rate hikes by the Federal Reserve Board across 2022, inflation has come down from almost 7% in June to 5% in December. Yet the Fed announced a 0.25 point hike today and reaffirmed its commitment to two more in March and May. Many economists and business leaders think the Fed will go too far, not only bringing down inflation but also triggering a recession. These trends and expectations will put downward pressure on mortgage rates.

The bottom line – if rates come down to the mid-5’s by mid-year, they’ll a) reach the same level seen at the Portland market peak a year earlier, when buyers competed fiercely to pay top dollar for a home; and b) fall below the 50- and 30-year historical averages of 7.81% and 5.97% respectively.

4. Move-up buyers – sell at a discount and buy at a bigger discount

Assuming housing prices and mortgage rates trend downward as forecast in Sections 2 and 3, 2023 will be a good year for move-up buyers. That’s because larger and more expensive replacement homes will offer bigger savings than price hits taken on current homes with no change in rates from the market peak. The table presents calculations across 5 hypothetical price points, with the 1st representing a 2BR-2BA condo and the 2nd a detached starter home. Importantly, the figures in rows 4-6 are maximums in a range, as explained in Section 7.

Price points12345
New home value at peak$300K$400K$550K$750K$1M
New home price at trough$255K$340K$467.5K$637.5K$850K
Savings on new home$45K$60K$82.5K$112.5K$150K
Price hit on current home*N/A$45K$60K/45K$82.5K/60K$112.5K/82.5K
Net savings*N/A$15K$22.5K/37.5K$40K/52.5K$37.5K/67.5K

*In the 4th and 5th rows, values shown before slash marks (/) are for moving up 1 price point; and those shown after slash marks are for moving up 2 price points.

In real life, different price points or market segments don’t move in lockstep over time. Luxury homes, for example, have been hardest hit in the market correction. So selling at price point 3 or 4 and buying at price point 5 will likely yield the highest savings in both percentage and dollar terms. On the other hand, some price points or segments may see declines less than the 15% predicted overall.

Timing: Act mid- to late-year to lock in price declines and on-par-with-peak and lower-than-historical average interest rates. Normally, home prices and mortgage rates move inversely, so downward trends in both can’t last.

Tip 1: Keep an eye on your job security, a potential dealbreaker. Unemployment is expected to rise to the mid-4’s or about 1 percentage point in a recession.

Tip 2: In Portland’s correcting market, more sellers are offering temporary rate buy downs. This may be something to ask for in negotiations to achieve further savings on a bigger and better home. However, you should be able to manage your monthly payment comfortably once the temporary buy down ends – typically after 2 years.

Tip 3: Should we see significantly better interest rates in future (with a decline of at least 1 percentage point the rule-of-thumb threshold), those making a move in 2023 can take advantage of them if they refinance. However, since refinancing costs about 3.5% of the loan amount, homeowners should plan to stay put for several years to come out ahead.

5. Cash downsizers – sell with a handsome total equity gain and minimize the cost of your replacement home

The coming year should also be good to those moving from a long-time family home to one that is smaller, easier to maintain and ties up less capital. Granted, the hit a seller takes on their current home will be larger than the savings on a smaller and less expensive one. (Read the table in Section 4 backwards to see what I mean.) However, here are 3 offsetting factors to keep in mind:

  • Paying cash for a replacement home will offer big savings in interest payments.
  • Downsizers moving to lower cost markets (the Sun Belt, for example) or to condos and townhouses (which typically depreciate faster than detached homes in a downturn) will maximize savings on their replacement homes.
  • Appreciation in the pandemic boom still far outweighs declines in value since the peak last spring, with Portland homes seeing an average net gain of almost 31% between March 2020 and last November – 6 months into the correction. Furthermore, the local market had a very good run in the years after the Great Recession and before the pandemic.

Of course, every homeowner dreams of selling at the top of the market – just as every golfer dreams of a hole in one. The fact remains that Portlanders with long tenures in their homes have done very well where growing equity and personal wealth is concerned.

Timing: To minimize further erosion of equity gains in the correction, it’s best to sell sooner rather than later.

Tip: Though current mortgage rates won’t eat into a cash downsizer’s equity on the buy side, capital gains taxes may on the sell side. Ask me for a basic explanation of how to estimate and minimize the tax bill on the sale of your longtime home. Of course, you should always seek tax advice from an expert.

6. First-timers – buy on a market downswing

If predicted trends come to pass, the market will be much friendlier to first-time buyers in 2023 than in 2022. Assuming rates in the mid-5’s, they’ll pay no more in interest than what we saw at the peak of the market but with prices down as much as 15%. That’s a significant improvement in purchasing power in the space of 18 months. For dollar figures, look no further than the 3rd column (since first-time buyers can rarely afford more than price point 3) and the 3rd row (since they don’t have a current home to sell) of the table in Section 4.

Timing: Act late in 2023 or early in 2024. Since conditions are more challenging for first-time than move-up buyers, it makes sense to wait out the market longer in the hope of further price and rate declines. Plus, first-timers can continue to grow their down payments and credit scores.

Tips 1-3 in Section 4 also apply to first-time buyers.

7. Caveats and call to action

               The chances of selling at a peak or buying at a trough are slim and come down to luck. That’s because we can only identify highs and lows with some months’ hindsight. Still, a skilled realtor can track current trends against historical patterns and help you take advantage of and offset market trends. To put it another way, the figures in rows 4-6 of the table in Section 4 are maximums that only a lucky few can expect to realize. I’ll monitor prices and rates closely throughout the year, letting my clients know if and when the time is ripe for a move. Please be in touch if I can help you! catherinequoyeser@kw.com/503 705 5725

Written by Catherine Quoyeser · Categorized: buyers, downsizing, home values and prices, sellers · Tagged: buyers, home values and prices

Jul 23 2022

What the housing market correction means to you

I’m sure you’ve heard about what experts are calling a housing market “correction.” This post offers some explanation, reassurance and advice. In fact, it’s organized in sections under those 3 headings. Jump down with your cursor if you want to go straight to “Advice.”

Explanation

The market shift has been triggered by a spike in mortgage interest rates to almost 6%, about double the rate in January. Combined with steeply rising home prices in the pandemic years, rising rates have dampened demand. Courtesy of Altos Research, here are key signs of the shift in the Portland Metro market over the past 3 months:

  • Speed of sales has slowed, with median days on market doubling from 14 to 28.
  • Listings seeing price reductions have almost doubled from 23 to 44%.
  • A gauge of the balance between supply and demand, the Market Action Index (“MAI”) has dropped by almost one-third from 93 to 64, with 30 and below defined as a buyer’s market.

The Regional Multiple Listing Service (RMLS) reported a doubling of inventory from 0.7 months in March to 1.4 months in June, a level not seen for 2 years. RMLS also reported slight declines in median (-0.9%) and average (-2.5%) sale price from May to June.

Reassurance

Mind you, it’s still a strong seller’s market in the Metro area, since a balanced market is defined as 4-6 months of inventory and our current MAI is well above 30. Furthermore, slowdowns in the speed of sales and appreciation are healthy trends. When sales are lightning quick, it’s harder for buyers to make thoughtful, rational decisions. And when home prices far surpass income gains – as they have in Portland and across the country – we approach breaking points for affordability and sustainability.

That said, a more serious concern is the risk of a recession over the next year or two. Most experts predict a decline in home values if an economic downturn comes to pass. Thankfully, Portland faces less risk on that count than others metro markets. On average, says Moody Analytics, American homes are overvalued by 23%. Portland is just one point above the average at 24%. Boise takes the top spot in the country at 72%, with Austin at 66%, Phoenix at 54% and Denver at 43%. “Bubbly” markets like these will likely see the biggest price drops if the economy goes into a recession.

Advice

The advice in this section is organized by categories of real estate plans.

  • If you’re in your forever home or won’t move for several years, you can ride out a possible downturn and don’t have to worry about a temporary decline in your home’s value or selling in a real estate cycle trough. Like the stock market, housing has always bounced back and averaged over 4% in annual appreciation historically.
  • If you’re selling your home over the coming months, expect to see more than one offer and go over list price only if it’s in excellent condition with standout renovations and staging. You’ll likely sell at list price if your home is in fair to good condition and priced right. If your home is overpriced and in fair to good condition, expect to sell after a price cut and at or above the average for days on market in your area.
  • If you plan to sell in a year or two, it’s worth seriously considering moving up your timeline or else pushing it out some years to avoid selling at or near a market low. This advice goes double if you’re a senior looking to maximize your equity cash out for retirement and/or exit the detached housing market for good.
  • If you plan to buy in the near term, you’ll likely see much less competition, have more time to decide to make an offer and may pay under initial asking price if the home has been on the market for more than a couple of weeks. Though sale prices may come down after you buy, the ongoing climb in inflation suggests that we may also see a continuing rise in interest and mortgage rates, which have a greater impact on your monthly payment than sale price.

On a final note, no one has a crystal ball – not the experts and certainly not me. But I’ll continue to track the market closely and post updates. Drop me a line if you have any questions or concerns.

Written by Catherine Quoyeser · Categorized: buyers, downsizing, home values and prices, sellers · Tagged: buyers, downsizing, home values and prices, sellers

Apr 08 2021

What’s the 1 step you can take to sell your home faster? Watch Episode 10 of Homing in on Portland and find out!

Spoiler: Price it right! Click the link below to watch the video. To cherry pick content, use this timed outline:
0:00 – 0:24​ Intro
0:25​ – 0:38​ The goal – right pricing
0:39​ – 1:21​ How a home’s value is estimated
1:22​ – 2:29​ Marking to market in PDX’s current white-hot market
2:30​ – 3:56​ Marking to market by segments – $1M homes in 97229 are hot, hot, hot
3:57​ – 4:40​ Overpricing – a mistake in any market
4:41​ – 5:07​ Underpricing slightly can attract multiple offers
5:08​ – 5:32​ Buyers need home value estimates too
5:33​ – 5:39​ Closing

Written by Catherine Quoyeser · Categorized: home values and prices, sellers · Tagged: home values and prices, sellers

Dec 27 2020

Tis the season for…housing market forecasts! Whether you plan to buy, sell or stay put next year, watch Episodes 5 and 6 of Homing in on Portland to get the jump on the Metro market now

After a remarkable year despite the pandemic, what lies ahead for Portland’s housing market in 2021? Based on a review of some of the best research and forecasts, my 2-part market preview offers insights for homeowners planning to stay put as well as prospective buyers and sellers. Click the play buttons below to watch Episodes 5 and 6 of Homing in on Portland. Once you reach youtube, click the “Show More” links in the descriptions below the screens for timed outlines that enable you to cherry pick content.

Can I help you make real estate plans for 2021? Call or email me at (503) 705-5725 or catherinequoyeser@kw.com

Written by Catherine Quoyeser · Categorized: buyers, home values and prices, sellers

Nov 27 2020

Are you a fan of Portland walks and walkability? Here – in 6 buckets – are tips and resources to learn and enjoy more

Episode 2 of my vlog counts the many ways Metro area walks and walkability enhance our lives. In case you didn’t catch it on Youtube or Instagram, you’ll find the video at the bottom of this blog post. The written tips and resources below are a companion piece. I hope they deepen your understanding and appreciation of where you live.

Bucket 1: Get walk scores

Find the walk score of your home or a listed property if you’re looking to buy. Just enter the address in the search window on this home page

Bucket 2: Learn how walkability affects home values

You’ll find Portland-specific data in the graphics of this Redfin article

Bucket 3: Join a Meetup walking or hiking group and let someone else plan your next outing (outdoor groups remain active in the pandemic)

  • Positively Portland architectural history walking tours are a favorite of mine. Eric Wheeler helps you get to know Portland neighborhoods and home styles.
  • NW Wilderness
  • Trails Club of OR
  • Portland Hiking Group
  • 55+ Fitness and Fun with Physical Activities

Bucket 4: Buy or borrow guidebooks to memorable walks in Portland and Oregon, some tailored to active seniors and kids

The links below the images will take you to amazon.com, but you may be able to find the e’books on the virtual shelves of your neighborhood public library.

Click hereClick hereClick hereClick here

Bucket 5: Brush up on walkability, the 15-minute city, and Portland’s complete neighborhoods

  • Global in perspective, this Bloomberg article lauds Portland as model city in car-centric America
  • This Bureau of Planning & Sustainability piece defines ‘complete neighborhoods’ and presents the city’s 2035 access goal
  • Our ParkScore courtesy of The Trust for Public Land
  • Our score and national ranking courtesy of WalkScore

Bucket 6: Last but not least and because a picture’s worth 1,000 words, here’s a slide show of the nature walk just steps from my door – meant to inspire you to get more joy out of your neighborhood or to visit mine

  • Have seen a Snowy Egret & a Great Blue Heron in this spot!
Homing in on Portland, Episode 2

Written by Catherine Quoyeser · Categorized: design, home values and prices, lifestyles, livability, urban planning and services, walkability

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