By Living Room Realty, April 24, 2021
The Portland Real Estate Market has strongly favored Sellers for the greater part of 7 years now, and this has largely been driven by a shortage of supply, coupled with low mortgage interest rates. There are many motivated Buyers, looking to lock in a home purchase at a great rate, but just not enough supply to meet the demand, which has caused the high level of competition we are seeing for Buyers.
But why is that? What is causing this seemingly never-ending cycle of low inventory in our region? Below are my thoughts on some of the main contributing factors.
1. Lack of New Construction:
According to Portland Alliance, despite historic economic expansion, our region has produced the fewest housing units over any 10-year period since World War II.
With the number of new households in the area exceeding the number of new homes being built, we have a situation where demand for housing cannot be met at current building rates. In order to balance the market, there needs to be a larger supply of new construction to keep up with the growth in our region.
This is a particularly complex issue, which dates back to the Recession in 2008-2012. Residential new construction hit all time lows during that time period, and it simply hasn’t ever fully recovered.
Additionally, the cost to build is significantly higher now, and I am sure many of us are aware that the price of lumber has skyrocketed during the pandemic — nearly quadrupling in price.
2. Hesitation to Enter the Market
Another issue that contributes to the lack of inventory, is a hesitancy from current homeowners to trade-up or downsize in the current market climate. I have spoken with a number of clients in the last year, and discussed the pros and cons of making a move in this market. There are many people who would love to take advantage of this opportunity to sell their current home, but the prospect of then entering the market as a buyer, is not all that appealing.
Buying and selling a home in the same market will always favor one side of this coin, but in the current climate, it so strongly favors sellers, that it intimidates some from even attempting to make the transition.
3. Duration of Homeownership
Another interesting factor contributing to the lack of housing supply, is that people are staying in their homes for longer periods of time. According to the US Census Bureau, the average tenure for homeownership in the United States is just over 8 years. In comparison, the average tenure was only 4 years between 2000-2007.
We can certainly speculate as to why this might be, but there doesn’t seem to be any overwhelmingly compelling evidence that points to exactly why people are staying put longer.
In any event, the solution to the lack of housing inventory is massively complex, and it will likely be a slow moving process to reach a point where there is enough housing supply in our region to meet the demand.
In the meantime, there are definitely still ways to make a transition in this market (see my previous blog post), and there are also ways to be strategic with your offer structure to help ensure you win in multiple offer scenarios. As always, I am more than happy to set up a time to meet, and discuss market conditions in further detail, so you can see how all of these moving parts affect your own personal sutuiaton.
