WHAT’S NEXT?

My crystal ball has been a bit murky lately, but I can tell you what I do know. 2022 was a wild ride in Portland Real Estate. The year started with off-the-charts demand and minimal supply causing sale prices to rocket into uncharted territory. With mortgage rates in the 3%’s, money was cheap and bidding up an extra $20k on top of the already-over-asking-offer was no big deal in the eyes of the buyer; anything to win. In the summertime rates shot up dramatically and caused a gravitational shift in the market. It didn’t exactly grind to a halt, but the presumptive “offer deadline on Monday” became a thing of the past.

As we sit here today rates are hovering right around 6% which is the highest they have been in quite some time. They have spiked into the 5%’s in the not-so-distant past, but usually political outrage would bring them down swiftly. When explaining pricing dynamics to buyers and sellers these days, the best tool that I’ve come up with is to look at the monthly payment at a few different mortgage rates.

Here is a simple scenario:

Sale price: $700k

Down payment: 20% so loan amount is $560k

Taxes: $7,500

Insurance: $1,200

With an interest rate of 3%, the monthly payment would be $3,086 per month. The same numbers at 6% equate to $4,082. So a difference of $1,000-ish a month for the exact same living situation. This is the crux of attaching a list price to a home at the moment and why the old paradigm of looking at recent comparable sales is not as reliable as it was just a few months ago.

In spite of all of that, there is still a mountain of interest in Portland Real Estate. Every other West Coast City is dealing with the same math, but the starting point in Seattle, The Bay Area and LA is significantly higher than the prices we have here. And we have demographics on our side; the biggest age group are Millennials who are entering their 30’s and becoming home buying age. Demand is slightly curbed for the moment, but even in the past few weeks I feel like it has been ramping up.

Inventory has crept up a little too, but we are still miles away from what would be considered a balanced or buyer’s market. There is really no great source of new inventory: “step-up” buyer/sellers have been disincentivized with rates*, permits for new construction are down significantly from the past few years and distressed homes are not likely to make a come back anytime soon**.

How 2023 shapes up will largely be driven by what The Fed decides to do with rates. If rates stay as they are or go up a little bit, I’d imagine that we’ll be looking at a continuation of the muted market of this Fall. If rates go down, it is game-on for a busy spring. I doubt that we’ll see the same exuberance as 2021/2022, but it should be active.

Speaking transactionally, this market is a way better platform for doing business today as compared to the past several years. Buyers actually have more time to make better decisions and negotiate repairs + credits. Sellers are still able to get a great return on their investments and walk with a healthy net. If you’d like to hear even more of my perspective…give me a call!!

*because of the rate increase, even a lateral move can make the monthly payment untenable. Current home was $600k at 3% = about $2,700/month. Step up home at $850k at $4,800/month. When I show those numbers, the response is often “we can live with what we have”

**this explanation is too long to type out. Give me a call if you want to hear the story.

503-490-6912

Drew Burchette

Principal Broker | OR

I arrived in the real estate business over a decade ago and have since helped scores of people buy and sell their homes. The groundswell that I created in my practice is rooted in the relationships that I have nurtured over the years. My style is educational, and I see myself as the coach and leader of your real estate transaction. My coaching is geared towards empowering you to make informed decisions that will lead to your best possible outcome. I excel at asking the questions that get to the heart of the matter which in turn enables a smooth sale process. Away from the office I am passionate about so many things, but it all begins and ends with my family. My boys are both in elementary school and parenting is an ongoing challenge and joy for my wife and I. We love to travel around Oregon, the East Coast, Mexico and beyond. My passion for surfing, kiteboarding, and fishing help to keep me grounded in life. Read more reviews

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