Portland Real Estate Bubble – Housing Market Crash 2019

portland real estate market bubble crash

You have probably heard the rumblings about the Portland real estate market and its future. Will the Portland real estate bubble pop? Will the Portland real estate market crash? These are excellent questions and I perform extensive research each year to help answer them.

Will the Portland Real Estate Bubble Pop in 2019?

No. The local and national economy is still roaring. Home prices went up to fast for too long, have dropped in many areas of Portland in 2018 and will drop in more parts of Portland in 2019. However, starting in 2017 local wages are starting to rise. While Portland real estate prices are likely to deflate for a few years, it may not take long (2-4 years of price drops) before the increasing local wages catch up and home sales start hopping again. You cannot have both a strong local economy and increasing wages and a housing bubble crash at the same time! What about interest rates? Mortgage interest rates have risen to about 5% for 30 year fixed loans, which historically is not bad, but now the national real estate market is slowing, dropping across the board from coast to coast. It is very unlikely the Feds will continue to raise rates in a significant way while so many homebuyers drop out of the market.

The Portland Population Boom is Over

A huge part of the reason Portland home prices got so high is out of state buyers coming in who could afford inflated real estate prices (and continued to push them higher). The local Portland population struggled to buy homes because while the local economy recovered from the 2008 recession, local wages have only recently started to increase. For years as the economy improved, from 2013 to 2016, Portland was one of the fastest growing cities in the country. That is over. Now Bend, Salem, Corvallis, Eugene, are all growing faster than Portland. Portland as a metro is no longer a top growing city in the country. Now homes priced over 500K, especially priced over 700K do not have much of a buyer pool to work with. The majority of locals cannot afford those homes and there are not enough new out of state buyers to pick them up.

There is not enough new Portland housing.

Okay, I said above that, You cannot have both a strong local economy and increasing wages and a housing bubble crash at the same time!, but I suppose it might still be possible to have a real estate market crash if we had an overabundance of housing inventory for sale. Now, while inventory is rising significantly in the Portland metro, it is doing so with resale properties with inflated prices (that will come down). Portland as a whole has not increased its overall housing inventory (with new homes) in a significant way in many years. New permits = new upcoming housing. According to Portlandmaps.com only 469 new construction permits have been pulled so far in 2018. When new construction is booming, that number is over 1,000 for the year. New construction in Portland has been slow for the last few years and is at a crawl now.

Why the Real Estate Market will Cool Further in 2019

Once again, home prices have simply been driven too high too fast. Not only was this due to a Portland population boom that is now over. It has also been due to a strange phenomenon the National Association of Realtors research discovered after the 2008 recession. For whatever reason, your average home buyer lived in a property for about 5 years prior to the recession. Now the average homeowner is living in their property for an average of 10 years. This is a huge change in a very short time frame. Also, new construction never picked up in Portland. So for a long time we had homes not coming up for sale because people did not want to move anymore, we had a massive population boom, and we had relatively few new homes for sale on the market. You can see why real estate prices went wild in Portland. So with the population boom over and slightly increased mortgage rates, there is nothing left to keep driving prices up and up.

It will be a buyer’s market in Portland by 2020 or 21 (latest).

The best time to buy a home is when the market is down. This should be obvious but historically buyers purchase when the market is up and do not purchase when the real estate market is down. This is the opposite of what buyers should be doing or preparing for. If you are not a homeowner right now, start saving up, the perfect opportunity is coming your way shortly. If you are a homeowner, guess when would be the perfect time to buy that investment property or vacation home? Because the local economy is strong and because Portland wages are rising and because new home construction is slow – this cooling of the Portland real estate market will not likely last more than a few years! Get ready to buy and then when the market bounces back up – you will be in a fantastic position.

The hardest hit portions of the Portland housing market will be

Whenever the real estate market drops in an area, condos, townhomes, and luxury homes are the first to drop their prices and end up being the hardest hit segments. All of these types of properties recover just fine along with the rest of the real estate market, so you could see the greatest investment opportunity (and the biggest price drops) in these areas. Of course, if you own one of these types of properties, you may want to hold onto them until the Portland housing market recovers or sell them fast (they have already dropped in price in 2018, but sell them before they drop more in 2019).

If you are looking to buy or sell a home you must know this

The seasonal real estate market impact in Portland is as strong a factor as the overall real estate market impact in Portland! What I mean is this, there is always a best month of the year to buy and a best month of the year to sell, regardless of whether or not it is an overall up or down year. Every year I write an article titled, “Best Time to Sell a House in Portland 20-“. You can be assured, the best time to buy is the opposite of the best time to sell. I write the article at the beginning of the year. Of course, my 2018 article is already out, but watch out for my 2019 update, it will be a little different.

Since there is no real estate bubble popping, no Portland real estate market crash coming, the financial advantages of homeownership vastly outweigh the positives of renting. You have to buy and sell market, but an experienced local real estate agent can help you do just that. If I can be of service, just ask!

November 8, 2018

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.

4% max to sell a home in Portland and SW Washington.
4.5% max to sell a home in Salem and Bend.
Over 2,000 homes sold.