What can we expect from the Portland real estate market moving forward in 2017?
It can get confusing due to all the different factors that affect us, from politics to interest rates and everything in between. The first thing to consider is that we’re in the eighth year of a bull market. Historically, we have cycles of seven years when the market shifts up or down, which is why experts predicted that the market would soften this year.
However, the opposite has happened.
Inventory is lower than expected and interest rates are still near an all-time low. Value appreciation is still in double digits and the high demand for homes keeps putting upward pressure on prices. Anyone selling their house should be thrilled. As a buyer, it can be frustrating right now. Some areas even have buyers needing to submit several offers before getting one accepted.
As for appreciation, it looks like values will rise another 10% this year based on how things are trending. Most economists say a healthy, sustainable economy will appreciate between 4% and 6% per year. We love that prices have rebounded after they tanked in the recession, but at some point, we have to ask ourselves if our market can continue to handle it.
We’re also an interest rate-driven market. Many don’t realize that if rates went up, we’d feel the change overnight. Rates going up by just 1% can change the buying power of many people by up to $30,000. Just recently when rates went up by one-eighth of a percentage point, many of our buyers couldn’t afford the same house. Remember, they’re likely to go up again this year.
Portland is a unique market that’s unlike the rest of the country, and we were the No. 1 city for people to move to the last couple years. I believe we had just under 100,000 people move here last year from all over and I think this will continue as well.
Finally, one big factor to keep in mind is the gap between income and home prices. Right now, they say the average household income is $68,000 and the average home for a first-time buyer is priced $400,000 or higher. If that gap gets larger, we’ll have to get a little nervous because of how it could change the market.
When we don’t have the incomes to support housing, we have a conundrum. The only thing that can start to put pressure on that would be the market going backward, which will be especially true if interest rates go up.
I don’t have a crystal ball and I don’t know what exactly will happen, so I’m keeping my eye on things as always. If you have any thoughts or questions or you’re looking to buy or sell a home here in Portland, don’t hesitate to give me a call or send me an email soon. I’d love to hear from you!