Rent vs. Buy a Portland Home in 2021
Potential first-time home buyers in 2021 have some tough decisions to make. Buying is always seen as more financially advantageous than renting, because the value of your investment will go up over time. After accumulating some funds for a down payment (and some roommate horror stories), most renters will attempt to buy a home in an area where they plan to stay for 6-10 years.
But is 2021 the year to do it? Initially you might think “no” when you consider that prices for Portland homes have climbed 7% over the past year, and a median-priced home is selling for close to half a million dollars as of January 2021 (according to the RMLS and Zillow).
You’re better off buying a home in about 3 years.
However, according to Zillow the amount of time to be financially ahead right now renting vs. buying is a mere 3 years and 1 month. So, going off that information if you’re planning to stay put for at least 3 years, it would be the right move. Also according to our 2021 Portland real estate market forecast, the market will increase (meaning you get instant equity after buying a home) in 2021 and is likely to for a few years to come (at least).
Also, mortgage rates are not just low, they’re the lowest they’ve ever been in US history, making this year an otherwise perfect time to lock in that low interest rate for the lifetime of your loan.
Let’s take a closer look at the numbers in question in 2021’s episode of the perennial housing contest: Rent vs Buy.
Portland Home Values, 2020-21
As we mentioned above, Portland home values are high right now, but they were actually pretty stable in 2019 and the start of 2020. Then, from March 2020, low inventory (sellers reluctant to sell in an uncertain climate), pent up demand from buyers who didn’t get on the market in spring, and some additional demand from people whose housing needs have changed during COVID, all combined to send prices in the upward direction.
The regions of Portland with the most significant gains in home prices in 2020 were:
- North Portland – 6.2% gain in average sale price in 2020
- SE Portland – 8.1% gain
- Lake Oswego/West Linn – 10.9% gain
The areas with the slowest growth in home values in 2020 were Beaverton/Aloha, West Portland and Gresham/Troutdale, but all these areas still saw just over 5% growth in the average sale price. Major market research groups agree that this solid growth in home values will only climb higher in 2021. Click here to read our full 2021 Portland real estate market prediction.
Regardless, home prices now and in the foreseeable future are going to be the most affordable in Gresham/Troutdale, Aloha, and the further flung reaches of the Portland metro area, east and west of the Willamette Valley. 2021 would be a great year to invest in these zones if you are able to live and work a little further from the urban area.
The Advantages of Low Mortgage Rates
Starting out the year in January 2021, mortgage rates are averaging 2.65 percent, a full percentage point lower than they were a year ago. Keep in mind that that’s an average number; it could go up based on credit score or even down if buyers are willing to pay higher points (fees) and down payment up front.
Still, it’s undeniable that locking in a low interest rate now could have financial benefits for home buyers for the lifetime of their loan.
That doesn’t mean that buyers with access to credit and a down payment should go out and buy the first Portland home they fall in love with. In 2021 it’s more important than ever to work with an experienced buyers’ agent, to avoid overspending on a home that could deflate back to normal market values in a year or two.
Do you have a Portland market expert on our side? Our top 1% buyers’ team is accepting new clients.January 25, 2021