Portland Real Estate Affordability Rate: 2023 Report

Housing affordability in Portland is a concern that has been brought into the spotlight due to factors like rapid population growth (which has begun to drop), inflation combined with income rates failing to meet higher costs of living, and both increasing rent and high mortgage insurance rates.

What is Portland’s Affordability Rate in 2023?

To calculate housing affordability, The National Association of REALTORS® uses a formula that assumes a homebuyer has a 20% downpayment and a 30-year fixed rate mortgage of 6.36% (per Freddie Mac). RMLS utilizes this formula to generate a quarterly affordability graph for the Portland Metro area.

As we can see in the graph above, a family earning the median income of $106,550 (per HUD) could afford only 90% of a monthly mortgage payment on a median priced home of $494,000 in December of 2022. This means they could not afford an average priced home in the area right now.

This is a significant drop of 26% from the affordability index of 116% at the end of 2021. (The 2021 suggesting that the median income family in Portland, Oregon could easily afford an average priced home.) And according to the latest 2023 RMLS market report at the beginning of March, the median sale price has risen to 512,900 (a slight rise from the start of the year, after prices dropped last fall) and will likely continue to rise (a little) throughout the spring as the selling market warms up, before beginning to drop again late this summer and fall.

Wages are Also Increasing

The good news is that the median income in Portland has also risen by nearly $10,000 from $96,909 in 2021. While Oregon’s remarkable financial recovery since the Great Recession and a tax season projected to award taxpayers with a record “kicker” refund contribute to the positive outlook, wages are not rising fast enough to meet housing prices in Portland. As we reported last year, wages in Portland are falling short of both the cost of real estate and inflation, and with the affordability rate falling under 100%, we are beginning to see the effects of this discrepancy on housing affordability in Portland.

Affordability in Portland, Oregon vs. the U.S.

Portland is still relatively affordable when compared to other major cities on the West Coast, but when compared to the rest of the country, the cost of living is 17.7% higher overall.

In the chart above, housing is the highest price category, at 19.5% higher than other U.S. cities. However, housing costs are higher still in other West Coast cities. In San Francisco, for example, the cost of living is 68.4% higher than in Portland, while housing is a whopping 61% higher.

Population Growth and Housing Availability in Portland

The population of the city of Portland was estimated to be over 650,380 in 2020 according to the U.S. Census Bureau, but in the years since, numbers have declined by -5.07% to 619,286 in 2023. Last month we analyzed the population fluctuations over the past two years within Portland and the nation, and found that while the city of Portland has recently lost numbers, the surrounding suburbs have experienced continued growth. Based on the latest U.S. Census estimates, Portland’s population is now projected to continue to decline, as shown on the graph below.

Portland’s Residential Infill Project (RIP) was implemented in 2021 to increase the availability of affordable housing by restructuring zoning regulations to allow the construction of more multi-family units. In June of 2022, the second phase (RIP2) went into effect, expanding the types of housing construction allowed in residential areas. But despite these allowances, the rate of new housing construction in October of 2022 had decreased since 2021 due to increased supply costs and labor shortages, not to mention high mortgage rates deterring buyers. Because these factors continue to impact the housing industry, construction rates may remain low in 2023.

Portland’s Rental Market Affordability

For those looking to rent, whether for location flexibility or lack of funds for a downpayment, rental rates in the Portland have risen 39% since this time last year, making Portland second in the country for fastest-rising rent, just after Austin, Texas at 40%. The median rent for Portland is currently $2,345, putting affordability further out of reach. And to make things more challenging for renters already burdened by inflation, a higher possible rent increase went into effect on January 1st that allows landlords to increase rent by up to 14.6%, a substantial increase over last year’s cap of 9.9%. With these high rents, a person is still better off financially owning a home in Portland than renting according to our 2023 report.

With these pressures on housing affordability in mind, the City of Portland is working to create more options for fair and affordable housing, producing 852 new affordable units in 2022 that will house an estimated 1,760 people. And there are 3,436 more units currently in development throughout Portland that will become available over the next few years, as shown on the map below. Try this helpful resource to browse properties that meet the criteria for affordable housing.

Portland’s Real Estate Market Affordability

As we wrote about in our latest Portland real estate market report, housing prices are still increasing, though not as dramatically as in recent years, and we expect to see a cooler housing market overall this year. This year started with a higher number of active listings at the beginning of the year than in the past two years. We are currently entering a seller’s market with higher inventory than in recent years, which may benefit buyers by reducing competition and resulting in more affordable prices in 2023.

Planning to Buy or Sell in 2023?

We have a thorough knowledge of the Portland metro area real estate market and 20 years of experience assisting homebuyers and sellers. Let our top 1% buyer’s and seller’s teams put our expertise to work for you! Call us at 503-714-1111 or chat with the bot on this site. We’d love to connect with you today!