There’s a current debate about whether Portland, Oregon, real estate is still affordable relative to other cities on the West Coast.
According to Corelogic, Portland ranks among the top five cities with the highest year-over-year appreciation. Additionally, Oregon has experienced a 9.1% increase in statewide housing appreciation, positioning it towards the top of the list.
For one, the market isn’t showing any signs of slowing down headed into the winter season. According to the RMLS, there were 2,996 pending sales accepted in October. To put that into perspective, it was the strongest October since 2005 and almost 20% higher than 2014. Portland Metro pending sales are up 23.4%, and closed sales are up over 20%. Every important metric was greater in 2015 than in 2014, making it one of the busiest years for the real estate service industry.
New listings have also increased, but only by 8.5%. This statistic begins to amplify the most basic laws of supply and demand. There are simply too many people wanting to buy too few houses. Inventory has remained under two months for the majority of the year, and in some neighborhoods, inventory is measured in only days or hours. That is painfully low and has pushed the average and median homes sales price to seven-year highs at $353,400 and $305,000, respectively.
But is Portland real estate still affordable? According to the National Association of Realtors, a family earning the median income of $73,900 (per HUD in 2015) can afford 134% of a monthly mortgage payment on a median-priced home. The Portland Affordability index reached an all-time high of 182% in March 2012, and a nine-year low of 89% in June of 2007.
Using this formula, the Portland real estate market is still affordable. But the real world doesn’t follow formulas, and if the market continues it’s powerful pace, it won’t be long before we are back to the affordability challenges of 2007.
The lack of inventory can be partially attributed to the length of time it took for developers and builders to recover from the last housing crisis. We had historically low construction starts and development applications for more than four years, while the population of Portland continually increased. The good news is the rise in building-permit and development activity over the last 15 months should bring a substantial increase in the new construction inventory in many areas for 2016.
What this means for you
The new inventory will allow buyers more options, and will relieve some of the upward pressure on housing prices. This relief will bring more sustainable levels of appreciation and help ensure Portland not only remains one of the best places to live, but also the West Coast city that remains affordable.