When Caitlin and Charles Vestal began looking to buy a home in January, the search quickly felt like a full-time job…
Here’s what they found:
- A market that posted the nation’s largest year-over-year gains in home values for four straight months between October and January.
- Prices that have risen by double-digit percentages in the past year: 17 percent in Portland, according to Zillow, and more than 13 percent region-wide.
- A remarkably low inventory of available homes, even in the traditionally slow winter sales months. In December, inventory hit its lowest level since at least 1999 and has only budged slightly since then.
- Housing prices that haven’t been seen in Portland since before the recession, or, in some cases, ever.
So how to navigate such an intimidating market?
“We just kind of had to wise up very quickly to the fact that it’s an insane game,” Caitlin Vestal said. “And that list prices basically mean nothing.”
The Vestals made four offers. They were rejected three times. Another time, they walked away because of issues with the home. “We had to really emotionally unhook from every house we made an offer on,” Caitlin Vestal said. “Because it was so depressing to keep getting rejected.”
Finally, they found a home: a three-bedroom, one-bathroom bungalow in North Portland’s Portsmouth neighborhood. The Vestals beat out 28 other offers with their $386,000 bid – 29 percent higher than the list price of $299,000.
They recently closed on the property, but they can’t move in until May. In an increasingly common practice, the deal was contingent on letting the previous owners rent the home, free of charge, for 60 additional days – because in this historically tight market, they were concerned about finding another home of their own.
Rising home values expand the market
… At first, buyers didn’t want to look east of Northeast 57th or Southeast 60th avenues, Brennan said. Then, it was 82nd Avenue. Now, buyers are happy as long as they’re west of Interstate 205. The same thing has happened on the city’s southern fringe.
“It used to be, don’t go south of Powell [Boulevard],” Brennan said. “And then it was don’t go south of Woodstock [Boulevard].” Buyers are still continuing to move southward, he added.
Neighborhoods like Foster-Powell and Mount Scott are particularly hot these days, according to Brennan. And the trend extends to suburban areas such as Milwaukie – where a new public transit extension opened last year – and Washington County, which will be home to massive expansions of single-family housing in Hillsboro, Beaverton and Tigard in the near future.
… It’s very common for homes to be on the market for less than a week. In Northeast Portland’s Sabin neighborhood, the median number of days on the market for the 71 homes that sold in 2015 was five, according to data provided by Redfin. The $595,000 median sale price there represented a 28 percent increase from the year before, third-highest in the region.
Renting can be even tougher
… As tough as Portland’s market is for home buyers, it might be even worse for renters. The latest biannual report from the rental industry group Multifamily NW found Portland’s rental vacancy rate was below 3 percent late last year. In close-in east side areas, average units were vacant for less than 12 days.
Rents were rising at an annualized rate of 14 percent, the report found – in some areas of the region, such as Beaverton, prices were increasing twice that fast.
… Another bubble?
Krautter said the most frequent questions he gets from clients are, “Are we in a bubble again?” and, “Is this market sustainable?”
But Krautter doesn’t believe home values are going down anytime soon, as long as inventory remains so low.
“You don’t all of a sudden see prices go down when the market’s this tight,” he said. He thinks “we have a minimum of two years” before prices will stop rising.
Plus, nearly a quarter of home sales in the Portland area in 2015 were all-cash offers, according to the housing research firm RealtyTrac. In those cases, there’s no risk of the buyer defaulting on a loan – and bad loans were a hallmark of last decade’s housing collapse. Increased regulations surrounding mortgage lending have made it tougher to qualify for a loan, as well.
Oregon state economist Josh Lehner doesn’t see price appreciation slowing much in 2016, either. The region is still underbuilding housing relative to the growing population, he said.
“It is increasingly likely that we will not see much improvement in housing affordability until the next recession,” Lehner said. “That is when we know for sure that demand will fall. Population growth will slow considerably, as it always does in recessions, and household formation, as well.”
But right now, Lehner said, “the regional economy is going full throttle.” In January, the state’s unemployment rate hit its lowest level since 2007.
“I just do not see a big enough increase in the housing supply to hold prices down or even slow them considerably,” he said.
**Several paragraphs were omitted from the original article. Check out the whole story HERE, on the Oregonian’s website.