THE NUMBERS THIS WEEK
Avg sales price was $576,395.
Avg # of offers – 5
Avg amount over list price was 8% = $46,000 over.
Inventory inched back up over 500 but buyer demand outstripped inventory keeping the market action index revving at 70.
WHY IS THE HOUSING MARKET SO HOT?!
1. Interest rates are at historic lows – 3% and under has been the norm, incentivizing buyers to shop, but causing potential sellers to hang onto their homes as rentals and investments rather than sell them.
2. People are living longer and today’s baby boomers are choosing to stay in their homes. Covid 19 isn’t over yet and while it’s still here, those who might have chosen adult living communities have put that off for the time being until that move looks safer.
3. Working remotely has become the new normal, but will it stick? Some people have decided against buying, and selling, because they don’t know if they’ll be heading back to the workplace or creating a more permanent home office. Purchasing their “forever” homes may have to wait until after Covid ends.
THE BIGGEST FACTOR
The biggest factor, by far, is that less housing has been built in the past decade, since the 2008 housing crash, than ever before. A tight labor pool, high timber prices and more building restrictions have slowed new construction. We, as a nation and city have not kept up with the demand for housing. We need more housing and it’s unlikely we will see enough inventory to meet demand for years to come.
ARE WE IN A BUBBLE?
Demand and the restricted pipeline of inventory, leads us to think not.
Second, the amount of cash in the market compared to the years leading up to 2008 is greater. The strong equity in our housing market will help prevent foreclosures.
Lastly, economists examine home prices in relation to rents—if rents don’t keep up with home prices that can be an indication of a bubble. In Portland the average rent for a single family home is $2,023. The average sale price is $575,000. Purchased with 20% down that equals a monthly mortgage payment of $1,900. Add in taxes and insurance, and rents and mortgage payments are currently comparable our market.