The Short Version
Continued strong, but slowing sellers’ market. As of July, 2017, Hayhurst’s median estimated home value rose 5.84% over the last 12 months, and 1.77% within the last month. Appreciation will slow, and possibly even level off over the next 12 months. Hayhurst will lag behind Portland as a whole, and appreciate 0% to 3%. Portland as a whole appreciates 3% to 5%.
The Long Version
2017 is a tough year to predict. We’ve got some pretty serious competing factors at work.
Factors Driving Prices Up:
- Low Unemployment
- Strong Economy
- 30,000 people a year moving to Portland Metro Area.
We’ve got low unemployment, a strong economy, and 30,000 people a year moving to the Portland Metro area. These factors are the recipe for rising real estate prices. But …
Factors Driving Prices Down:
- Decreasing affordability
- Price equalization with other west coast cities
- Increasing interest rates
- Thousands of rentals coming online in 2017/2018
The double digit appreciation over the past five years has driven prices up to the point where more Portlanders than ever before are unable to afford to buy a house. The average sales price of a house in Portland in April 2017 was $428,800. Assuming an FHA loan with 3.5% down, that’s about $2600 a month with taxes and insurance. To qualify for that house, you’d have to earn at least $80,000 a year – that’s $20,000 more than Portland’s average family income.
Portland real estate prices are closing in on other west coast cities. While we’re still way behind the bay area, we’re closing in on Seattle and Southern California. This makes a move here from SoCal less attractive and less affordable for those cashing on their Southern California equity and buying here for cash.
Mortgage interest rates have risen by a full point since October 2016, in response to a half point increase in the Fed’s prime rate. The Fed stated it will raise rates by another 1.25% by the end of 2018, so mortgage interest rates will rise at least another 1.25%. The same house that costs $1600 a month at 3.25% mortgage interest, costs over $2000 a month at 5.5% Mortgage interest.
Development friendly zoning, an improving economy, high demand and high rental rates led to a building frenzy in the last couple years, capped by a super-frenzy in the end of 2016 and beginning of 2017 as developers raced to get their plans approved ahead of expensive inclusive housing requirements starting February 1, 2017.
We have extremely strong competing forces which, I think, will mostly cancel each other out, with the exception of mortgage interest rates. I believe these will cool Portland’s market, and slow real estate appreciation in 2017 and 2018.