Affordability – 2015 Portland Housing Market

Is Portland an affordable place to buy a home?

It’s a complicated question and how you answer it depends on what’s important to you. Luckily, we can count on the RMLS to break it down for us in simple numbers.
It’s called the Affordability Index, calculated by our friends at the National Association of REALTORS®. Their formula combines current mortgage rates, the average home price, and the median income and spits out a number that tells us how much mortgage the average home buyer can afford.

Let’s look at this number a little more closely. The RMLS (the primary listing service for all real estate in the Portland Metro area) just calculates the Affordability Index for residential listings in the Metro area, and it’s meant to give those seeking a median-priced home with a median income an idea of how easy or difficult it will be to make those mortgage payments through the lifetime of a 30-year fixed rate mortgage.

Good news: As of March of 2015, the formula says that a buyer with a 20% down payment can afford 143% of a monthly mortgage payment. That means that paying the full (100%) mortgage payment is well within reach.

According to this Index, affordability for a Portland home last peaked in March 2012 at 186%. Since then, the affordability index appears to have stabilized in the 120% – 150% range.

Affordability hit a ten-year low in June 2007. At that point, the median homebuyer was only able to afford 88% of their mortgage payment. Knowing now what we didn’t know then, it’s easy to see how the housing collapse happened. Affordability is everything!

Of course, the Affordability Index is not the only thing you should be looking at if you’re considering buying a home in Portland. The Index assumes a lot of things — how much down payment you can afford, the mortgage rate (determined by Freddie Mac) and what your income is (right now, it uses a median of $73,900 per family). Even if you meet the “median” profile, there may be other factors involved. Your mortgage lender can talk you through the details and help you figure out what your ideal home price range is.

What we do know is that the median home price in Portland is climbing. The $290,000-median that the RMLS used for this Affordability Index report back in March has now risen to $333,000. Have wages risen and/or mortgage rates fallen to compensate? We’ll find out in the next Portland Metro Area Residential Real Estate Affordability Index report from the RMLS! Stay tuned to your favorite Portland real estate agent blog. Here’s a guess though, while Portland area homes are relatively affordable now (compared to average Portland incomes) that is going to change and Portland real estate is likely to get more expensive in the next few years. With continuing low interest rates, it is still a good time to buy (for now).