Staying on Top: Nine Trends that Will Shape the 2015 Housing Market. Regular readers of our “Notes. . .” can recite the current market dynamic like a catechism: “Low mortgage interest rates and low housing inventories will push the cost of housing higher as opportunity-seeking buyers bid up prices for limited quantities of available homes.” Amen. We, your daring prognosticators, believe that this dynamic will persist for another 18 months, at least. Join us here for a look at the top influences that will affect the dynamic in our 2015 Portland market.
Let’s begin with a recap. We finished 2014 on a high note – the RMLS of Oregon reported that housing prices rose another 7.2% last year, that is, we added 7.2% appreciation to 2013’s stellar 12.9% rise, moving total appreciation up 20.1% in 24 months. And the 2015 real estate market holds the promise of sustaining the past two years’ performances. (For last year’s market stats, including a breakdown of Portland metro appreciation by area, check out our most recent “Portland Market Update.”)
Looking ahead. Here then is a look at the strongest trends we’ll see in the 2015 Portland metro market:
- Appreciation will slow in 2015. The 2015 market should bring the market into better balance, with modest appreciation – say 3% – to – 4% this year – and a return of more negotiating power to buyers.
- Investors are getting pushed out of the market. Starting in 2012 and 2013, ultra-fast price appreciation and the lure of foreclosures created a feeding frenzy for real estate investors willing to pay cash for bargain properties. Traditional buyers found it hard to compete against cash and many were sidelined. 2015 will be the year investors back off and we see more opportunities for buyers with regular jobs and, ideally, 20% down. But this year there’s more room for buyers with limited cash to close too, read on.
- Developers will continue to compete with first-time buyers for inexpensive close-in properties. For the past two years developers have been tromping all over first-time buyers in the stampede for affordable buildable lots. The developers’ cash wins every time, the cute rag-tag fixer-upper is “scraped,” and one or two big new homes go up in its place. In some instances the act is justifiable: some tear-downs are simply beyond their functional lives and should be replaced. The merits of replacing those small affordable homes with expensive McMansions are debatable however, and worth a whole issue of our “Notes. . .” that’s devoted to that question. Let’s leave it for now with this: we applaud the efforts of some architects and developers to replace obsolete housing with affordable and architecturally pleasing alternatives.
- Oregon is where it’s at. Katie Lobosco, writing for the Jan. 8, 2015 issue of CNN Money, reports that “Everybody is Moving to Oregon.” Citing data from United Van Lines’ 38th annual National Movers Study, which tracks customers’ migration patterns state-to-state during the course of the past year, it found that Oregon is the top moving destination of 2014, with 66 percent of moves to and from the state being inbound. Oh, we almost forgot: Oregon was United Van Line’s top moving destination in 2013 as well.
- Baby boomers and Gen-Yers will continue to push growth in Portland. The principal destination for people moving into the state is Portland, and boomers and Gen-Yers make up a good proportion of those who plan to make Portland “home.” Both demographics are competing for the same kind of housing now: smaller units near the urban core. (An unanswered question: as the Gen Yers start to form families, will they follow the decades-old path back into the suburbs to raise them?)
- Portland’s still relatively inexpensive. Compared to its big sister Seattle to the north (which had a median sales price of $485,000 versus Portland’s $333,000 average), and the California behemoth to the south, Portland remains an affordable destination, by West Coast standards at least.
- Rents are sky-high. Ask anyone who’s renting around here: rentals are hard to find, and expensive. The rent-vs-buy proposition seems easier to answer when rents rival mortgage payments. And in December major lenders Fannie Mae and Freddie Mac announced programs that will allow first-time buyers to get a mortgage with a low, three percent down payment instead of the previously stated five percent down. That’ll open more doors for lots of young buyers with high debt and low savings. Welcome Home, Gen-Xers and Gen-Yers!
- New Frontiers. We’re putting our bets on a few up-and-coming neighborhoods. Montavilla, Lents, Woodstock all the way east as far as 82nd, and the Foster Blvd. alignment ripe for pioneering. There are great transportation alternatives in those neighborhoods and the grocery / dining / entertainment amenities are filling in nicely. And it’s still not too late to be part of the “St. John’s Renaissance!”
- Nothing last forever. Rising consumer confidence, low interest rates, low unemployment rates, and less-restrictive mortgage requirements are among the principal reasons the housing recovery has been so successful. A change in these factors could inhibit the market’s recovery, and, frankly, it won’t be long before we’ll need to see stronger wage growth just to keep up with rising house prices. Stand by!