As Portland Home Prices Soar, Home Affordability Takes a Hit

Low inventory and rising home prices have made themselves felt here in Portland, as they have across the country. According to the latest numbers from Fannie Mae’s Home Purchase Sentiment Index® (HPSI), 64% of respondents feel that right now is a bad time to buy a home, while 77% feel it’s a good time to sell. Buyers, especially first time buyers, are feeling the sting of lack of affordability pushing them out of the market.

So how does Portland shape up in comparison to the rest of the country? We’ll take a look at ATTOM’s recently released affordability data for the second quarter of 2021 to find out.

Portland Home Prices Grew Faster Than Wages

To consider affordability, you can’t just think about what homes cost. Home value appreciation is generally not only expected, but considered a good thing! Buyers don’t want to invest in a property that depreciates in value.

The problem comes in when an area’s median income isn’t keeping pace with the increased value of homes. When home prices grow at a greater rate than wages, the folks at the shallower end of the wage pool become edged out of home ownership. And unfortunately, that seems to be the case in many areas, including in Portland. ATTOM gives Quarter 2 data according to county, so let’s explore the Portland metro area’s numbers. Their “affordability index” score gives you a snapshot look: under 100 means an area is less affordable than its historic average.

PDX Metro Area: A County by County Breakdown

Multnomah County – Affordability Index of 91

  • Multnomah County saw a year over year home price growth of 15.7%. Meanwhile, wage growth clocked in at only 9.8%.
  • Median sales price: $480,000
  • Percent of annualized income to buy: 36.6%

Washington County – Affordability Index of 92

  • Washington County saw a year over year home price growth of 16.5%. Meanwhile, wage growth clocked in at only 9.1%.
  • Median sales price: $494,975
  • Percent of annualized income to buy: 32.9%

Clackamas County – Affordability Index of 88

  • Clackamas County saw a year over year home price growth of 18.9%. Meanwhile, wage growth clocked in at only 9.0%.
  • Median sales price: $520,000
  • Percent of annualized income to buy: 44.2%

Yamhill County – Affordability Index of 77

  • Yahmill County saw a year over year home price growth of 20.0%. Meanwhile, wage growth clocked in at only 8.0%.
  • Median sales price: $420,000
  • Percent of annualized income to buy: 46.9%

Clark County, Washington – Affordability Index of 89

  • Clark County saw a year over year home price growth of 15.9%. Meanwhile, wage growth clocked in at only 8.7%.
  • Median sales price: $440,506
  • Percent of annualized income to buy: 35.5%

The Trend? Affordability Swings Downward

As you can see from the above numbers, all five counties score under 100 on ATTOM’s affordability index, meaning they’re less affordable than they historically have been. That trend didn’t start with the pandemic – home prices in Portland were rising before this. And it can be a bit deceiving to compare 2021 to 2020, which saw such a strange aberration in the market. But it does seem that rising home prices have become more pronounced. For example, this is the first time in the past few years that a county dipped into the 70’s (congratulations to Yamhill County).

How Does Portland’s Affordability Compare to Rest of the U.S.?

A key piece of data to pay attention to here: the percentage of income needed to buy. According to ATTOM’s report, 57% of counties required 28% or less of average local wages to buy a median-priced home. By contrast, all of our five metro area counties came in at over 30%. Yamhill County and Clackamas County saw the highest margins at 46.9% and 44.2% respectively.

That being said, it’s pretty par for the course for large metro areas to prove less affordable. For that reason, ATTOM gives some statistics specifically for counties with populations over 1 million. Kings County (Brooklyn, NY) requires a whopping 100.8% of wages, for example. Marin County, outside of San Francisco? You’re looking at 81.4%. And several other counties in New York and California ranged from 50% to 90%. So in that context, while Portland comes in at above the national average, we aren’t seeing a complete obliteration of the first time homebuyer.

The Solution to Portland’s Affordability: Inventory, Inventory, Inventory

We aren’t in the business of talking wage increases here. But from our perspective of real estate expertise, we know that what can truly put the brakes to Portland’s decrease in affordability is more inventory. And by that we mean more homes on the market as well as a greater diversity of homes. Recently we profiled what Portland’s housing inventory will look like in the future, and the answer is density – more ADUs, more upward building, etc. Having more options for the buying public (coupled with conscientious city planning) will mean more affordability.

Our latest monthly RMLS numbers – for June – show inventory leveling out. June came with a ratio of 0.8 for active residential listings versus closed sales. That’s up slightly from May’s record low of 0.7, but not by much. In order to truly get back in the swing of things, look for that ratio to be over 1.0. Total market time decreased from 22 to 21 days. So, still remaining at an extreme low.

There’s hope on the horizon, though. We won’t have full numbers for July inventory until next month, but so far things are looking to be on the rise.

graph of Portland inventory, april to present

And new listings, which dropped in May, made their way back to match 2019 numbers in June.

Graph of new listing

These numbers are encouraging. But Portland still needs an influx of new homes on the market to make up for the last year of heavy competition and high demand.

Looking to Buy in Portland?

With the affordability struggles these days, it can become easy to feel down about the home buying process (like those respondents in Fannie Mae’s HPSI). But don’t lose hope. When you’re ready to buy, you’re ready to buy! And the best thing you can do to make sure you get into the home of your dreams is to secure a competent and knowledgeable real estate agent. And you’ve come to the right place! Contact our top 1% buyers agents today.

July 12, 2021

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

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