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May 23 2015

Understanding Portland’s “hot” housing market – Part 2

Bratwurst on grill at farmer's market (Ian Sane)
Bratwurst on grill at farmer’s market (Ian Sane)

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.

  1. What is a hot market?
  2. Why is the Portland housing market hot?
  3. What are the benefits, costs and risks of the market – and for whom?
  4. 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.

Written by Catherine Quoyeser · Categorized: growth trends, home values and prices, livability, urban planning and services · Tagged: growth trends, home values and prices, livability, urban planning and services

May 14 2015

Understanding Portland’s “hot” housing market – Part 1

(Ian Sane)
Portland barista (Ian Sane)

Portland’s “hot” housing market has been much in the local news over the past few weeks – from KATU’s Your Voice Your Vote program on May 10th, to Oregon Public Radio, OregonLive, Portland Monthly, Portland Tribune, Investigate West and more. Key facts, trends and perspectives in the coverage are distilled in this two-part posting focusing on 4 questions:

  1. What is a hot market?
  2. Why is the Portland housing market hot?
  3. What are the benefits, costs and risks of the market – and for whom?
  4. What steps are proposed to offset costs and minimize risks?

1. What is a hot market?

Portland’s inventory of homes reached a 10-year low in March according to the Regional Multiple Listing Service. At the sales rate current then, it would have taken just 1.9 months to sell all listed properties, well under half the national average for inventory. In April inventory dropped to 1.8 months.

Competition among buyers for the limited supply of homes has led to multiple offers, quick sales, spikes in the volume of pending and closed sales, and price increases – with the sales price sometimes well above the asking or list price. As of last month, average and median sales prices had increased by more than 22 and 23 percent respectively since 2012.

The trend of low inventory is not new. Inventory has stayed below the threshold for a balanced market (6 months) for over 3 years. But the trend has intensified, as shown in the table. The market is now tilted heavily in favor of sellers. In other words, it’s hot, hot, hot.

Portland Metro Inventory (in months)
2012 2013 2014 2015
Jan 7 4.7 4.1 3.4
Feb 6.5 4.5 3.9 3.0
March 5 3.2 3.1 1.9
April 4.7 3.1 2.8 1.8

2. Why is the Portland housing market hot?

In this hot seller’s market, the demand for homes far exceeds the supply. The table below fleshes out key factors that have created the imbalance.

Factors increasing demand Factors limiting supply
  • Portland is experiencing economic and population growth, in part as a result of in-migration from other states.
  • There is still pent-up demand created by the recession, when many people lacked the confidence or financing to buy a home.
  • Interest rates continue at historic lows and though credit remains tight, it has eased.
  • Owning a home is about 30 percent cheaper on average than renting a home in Portland.
  • As the housing recovery continues and foreclosure sales have dried up, investors have flooded Portland’s conventional market. Cash sales accounted for one-third of all single family home sales last year. In addition to flippers, remodelers and developers, new private equity firms or institutional investors have bid up housing prices. So have a growing number of ordinary homebuyers, who try to compete in the marketplace by paying cash or overpaying.
  • Owners of existing homes are not selling because they worry that they can’t find a new home, they don’t have enough equity in their current homes to afford a new one, or they are waiting for home prices to reach or surpass pre-crisis levels.
  • Construction of new homes has not kept pace with Portland’s population growth due in part to the lingering effects of the recession. Annual production of new housing has not yet regained highs seen before the recession.
  • Additions to the city’s stock of housing have lagged behind population growth for another reason. Local policy makers have flinched in the pursuit of housing and population density under pressure from

– market forces,

– developers seeking buildable land, and

– residents of close-in, established neighborhoods opposed to infill, taller buildings and zoning changes.

New development has been pushed to the suburbs and to the fringes of an ever-expanding Urban Growth Boundary. The result? Portland averages just 6-10 housing units per acre. And it ranks 8th among major West Coast cities in population density – well behind sprawling Los Angeles. In fact, Portland has fewer people per square mile than suburban Aloha, Cornelius, Happy Valley, Beaverton, Gresham, Tigard and Sherwood.

Click here to read Part 2.

Written by Catherine Quoyeser · Categorized: growth trends, home values and prices, urban planning and services · Tagged: growth trends, home values and prices, urban planning and services

Mar 25 2015

Will Portland outgrow its livability? Weigh in on the city’s plans for the future

Light rail (Bruce Fingerhood)
Light rail (Bruce Fingerhood)

Now at just over 600,000, the population of Portland is expected to increase by some 30-50,000 people in the next five years. A story in yesterday’s GoLocalPDX reviews the implications — good and bad — of rapid growth.

  • Population and economic growth usually go hand in hand. So Portland will likely experience an increase in jobs and overall prosperity.
  • But economic growth may not be sustainable or of optimal quality since the city attracts many young people who don’t have jobs and retirees on fixed incomes.
  • The city’s current Urban Growth Boundary — designed to limit urban sprawl and promote density — may not be able to contain or house a growing population. Already the supply of single family homes and apartments is low compared to demand. Prices and rents have risen sharply.
  • Rising home prices and rents fuel gentrification, which revitalizes neighborhoods and increases the net worth of homeowners. But it also displaces lower income people unless construction of affordable housing is encouraged and enforced.
  • Enlarging the Urban Growth Boundary to accommodate population growth will lead to urban sprawl, more freeways and traffic congestion and tend to sap the vitality of the city center.
  • If the current Boundary is maintained, then the city will need to grow up. But taller buildings block light, create wind, and undermine the walkability or livability of city streets. Already residents and businesses in the west quadrant have raised concerns about taller buildings.

City officials will need to address these issues as they draw up the next 20-year plan for urban development. The GoLocalPDX story encourages residents to accept the mayor’s invitation to help shape the plan with their input.

Written by Catherine Quoyeser · Categorized: growth trends, home values and prices, livability, urban planning and services · Tagged: growth trends, home values and prices, livability, urban planning and services

Mar 16 2015

In the crystal ball for Rose City — retirees are coming

Portland Postcard from 30s or 40s by Boston Public Library
Vintage postcard circa 1935 (Boston Public Library)

The Wall Street Journal has called Portland one of the best places to retire in America.

The number of residents aged 65 or older in the metropolitan area is expected to increase by 106 percent between 2010 and 2030 — as compared to an increase of just over 34 percent in the US population as a whole.

What are the city’s attractions for Baby Boomers?

– A mild climate

– Compact and walkable urban development

– Lively and affordable culinary and performing arts scenes

– A culture of kindness

– The largest urban forested park in Agen Sbobet the country just minutes from downtown

– An “unstated religion” of nostalgia expressed in its large stock of historic homes

– Intellectual stimulation with over 12 universities and a public library system with the 2nd-highest circulation in America after New York City’s public library

– A strong spirit of voluntarism and civic engagement

On the down side? The cost and limited supply of housing and relatively high property taxes.

Slot Online

Written by Catherine Quoyeser · Categorized: growth trends, lifestyles, livability, urban planning and services · Tagged: growth trends, livability, retirement, urban planning and services