This two-part posting distills key facts, trends and perspectives in recent media coverage of Portland’s hot housing market. Today’s posting picks up where Part 1 left off: Questions 3 and 4.
- What is a hot market?
- Why is the Portland housing market hot?
- What are the benefits, costs and risks of the market – and for whom?
- What steps are proposed to offset costs and minimize risks?
3. What are the benefits, costs and risks of the market – and for whom?
To some extent, the benefits, costs and risks of a hot market vary depending on who you ask.
- Sellers like the market more than buyers, of course. But sellers usually have to buy a replacement home. In fact, many owners have not put their homes on the market out of concern that replacements aren’t available – a factor that has limited inventory and added heat to the market.
- Agents representing sellers tend to like the market more than those representing buyers. Buyer reps often write multiple offers on multiple homes before a sale is closed and a commission is earned. Though marketing a home is easier in a seller’s market, listing agents put in more time fielding and analyzing multiple offers for their clients. Of course, most agents represent buyers and sellers and all face increased time pressures due to the speed of sales.
- In last month’s first State of Housing in Portland report, the Portland Housing Bureau found that lower income households, people of color, single mothers and seniors are being priced out of the city’s housing market, both rental and homeownership.
- Even households earning the median income (about $56K per year) are being priced out of homeownership in many areas. According to the Bureau’s report, these households can afford to buy a home in 9 of the city’s 24 neighborhoods.
- Investors seem to have profited in the Portland market. Last December, for example, RealtyTrac reported that institutional investors in Portland could expect an equity return of 50 percent if they were to sell the single family homes they had bought as rental properties since 2012. Portland was ranked #2 among US cities for this potential rate of return.
- In fact, most owners of residential property benefit from rising values, yet all face risk if the hot market creates a bubble. This month analysts at Fitch Ratings identified Oregon as one of 9 states where home prices are overheating and said the Portland market is 9 percent overvalued. Still, that is one-third the overvaluation seen at the height of the housing bubble in 2008, according to OregonLive. And on KATU’s May 10 Your Voice your Vote program, realtor Sarita Dua suggested that strict lending standards will curb the trend. Even if there is volatility or a correction in the near term, good average gains in value can be expected for those who stay in the market over the long term.
4. What steps are proposed to offset costs and minimize risks?
On KATU’s May 3 Your Voice Your Vote program, Portland Mayor Charlie Hales identified growth as the #1 issue facing the city, and increases in housing prices as the #1 side effect of growth. What solutions are policy makers proposing?
- While stressing that economic forces can’t be tamed, Mayor Hales has called for special taxes on demolition of homes worth at least $200,000 to build larger and more expensive ones, with the new tax revenues directed to affordable housing.
- The Portland Housing Bureau will gather feedback on its State of Housing report and make policy recommendations in the coming months.
- In April the state House of Representatives passed a bill allowing local governments across Oregon to set affordable housing requirements for large subdivision and condo projects in exchange for developer incentives – such as bigger buildings, fee reductions, subsidies or faster permitting. Oregon and Texas are the only states to prohibit what is commonly known as inclusionary zoning. House Bill 2564 is now under consideration in the state Senate.
The Portland Business Alliance is concerned that the city’s hot housing market will make it difficult to recruit employees in areas where middle-wage jobs are concentrated. While supporting incentives for workforce housing, the Alliance believes middle-wage job creation and wage or income upward mobility are more effective policy choices than housing affordability.
Architect and native Portlander, Rick Potestio, points to the King’s Hill section of Goose Hollow as a vibrant, dense, diverse, tree-lined, garden-filled, mixed-use model for the rest of the city. He envisions a partnership in which planners and neighborhood associations work together to cluster such development around schools and parks rather than mass transit corridors. The result? Portland can grow while maintaining or enhancing the qualities that draw newcomers: livability, character, affordability, diversity and sustainability. Potestio’s vision was presented in the April Portland Monthly, fleshed out in a follow-up piece on the magazine’s website, and featured in a May OregonLive report.