Portland, Oregon New Home Construction Numbers into 2023
It’s happening. The Portland real estate market is cooling after a two-year hot streak. Home prices have slowed and started to drop in some areas. Likewise, new home construction is down across the country, according to the U.S. Census July, 2022 report. Portland, Oregon has done a lot to try to increase the amount of available housing with recent updated high density zoning laws, but in terms of new home construction, those efforts have yet to bear any fruit what-so-ever. This is most likely due to the increased cost and shortage of materials, and lack of available labor over the past few years.
Portland New Home Construction Numbers in 2022
|Portland New Home Construction||2015||2016||2017||2018||2019||2020||2021||2022|
|Number of Finalized Permits||931||980||917||967||697||500||571||533 as of Oct.|
New Home Construction has Dropped in Portland, Oregon
We can see the obvious low point in 2020, but new home construction permits barely increased in 2021 and look like they will remain flat and incredibly low overall through the end of 2022. With the recent increase in interest rates and ongoing material and labor shortages, we will be lucky to match 2022’s new home construction numbers in Portland, Oregon in 2023.
Here in Portland, builders of single-family houses, acquired only 7.6 permits per 10,000 residents in the first three months of 2022. Considering that Portland has some of the highest priced housing in the country, it doesn’t follow the typical line of economic reasoning: that higher prices lead to bigger supply. According to Portland City Auditor Mary Hull Caballero, part of the reason for this is the arduous bureaucratic processing of permit requests.
What Does the Cooling Real Estate Market Mean for Builders?
Builders are also taking a pause. For them, it’s due to buyer reluctance to move ahead with home purchases. The National Association of Homebuilders (NAHB) Housing Market Index shows that builder confidence has “plunged” after steadily falling for eights month in a row, decreasing six points in August to 49, the first time since May 2020 that the index fell below the break-even mark of 50.
With home prices skyrocketing over the past two years, builders overbuilt in an attempt to capitalize on the hot market. But now, with the recent and rapid turnaround, the immediate future is looking pretty grim.
Continuing supply chain issues also pose a threat to new home construction, creating an increase in the cost of materials. Add to that, obstacles in production, inflation, and out-of-reach affordability for buyers due to the higher interest rates mentioned above, along with the cost of land, and many builders are stopping construction altogether. The Housing Market Index reported that 13% of builders who took the survey reported “reducing home prices in the past month to bolster sales and/or limit cancellations,” according to Jerry Konter, Chairman of NAHB.
New construction for privately owned single-family starts have seen the most notable recent drops—a 9.6% decrease (to 1,446,000) for single-family homes in July 2022 from the revised June estimate (1,599,000) and an 8.1% decrease since July 2021 (1,573,000).
Labor Shortages Will Also Impact New Home Construction into 2023
With about 25% of construction positions unfilled, labor wages are expected to increase to encourage more people to fill the positions. This, in turn, will drive the cost of building projects. According to Nick Grandy, construction and real estate senior analyst with RSM, an audit, tax, and consulting firm, the second half of 2022 and into 2023 will bring increases in construction projects due to these labor wage increases: “We’re going to see jobs that were predicted to cost $500M end up costing $600M, because you’re going to need to pay people more,” he says.
What Does the Future Hold for New Construction in Portland in 2023?
The general consensus seems to be that the new home construction market will suffer noticeably, just like most of the other segments of the real estate market well into 2023. Click here for our full 2023 Portland real estate market forecast.
Time will tell how the housing construction crisis will shake out for Portland. In the meanwhile, some developers are still willing to sink their time and money into the Rose City. First, there’s the proposed 337-apartment at NW 9th and Hoyt and another apartment complex at NW 23rd and Marshall and other parts of the city. As for single-family construction, there’s the proposed Alpenrose Dairy real estate project, and let’s not forget the potential real estate and housing options created by Portland’s Residential Infill Project (RIP part 1 and 2).
Questions about New Construction Homes in Portland?
We’ve been helping people find homes they love for almost 20 years, and have extensive experience selling new construction homes across the metro. Call our top 1% buyer’s team today at 503-773-0000, or if you have a home you want to sell, call our top 1% seller’s agents at 503-714-1111. You can also chat with the bot on our site. We look forward to connecting!October 5, 2022