Rent vs Buy, Portland Real Estate Market – 2019
According to Zillow research, rents fell nationwide this year for the first time in six years. Portland led the way with the biggest decline over last year: 2.7% What does this mean for renters who are considering purchasing a home in 2019?
To find out, let’s put that number in context. Just three years ago, home ownership statewide was the lowest it had been in decades. As a result of increased demand, rents skyrocketed in Portland by 7.2%.
It’s hard to believe in that so short a time, we’ve actually reversed course to see a decline in average rent by nearly three percent. First of all, the free market did its work: As rents climbed, homeownership became more attractive. More renters became homeowners in Portland. Second, combine that with the insane amount of new massive apartment buildings that were constructed (and are still being constructed for some reason!), creating a significant influx of available places to rent. Third, add that to a significant slow down in Portland population growth, and you have a fairly comprehensive reason for the current rent decline.
Understanding what forces drive the real estate and rental market can help you make an informed decision to buy or keep renting in 2019. Here are few points to consider:
- Renters, I hope you like high-rises. Due to all the new regulations that favor tenants in Portland, small-time landlords, the ones that own a few single family homes, are getting rid of them and getting out of the business. There are fewer and fewer choices for renters who want to lease a regular detached home, because those landlords are getting out of the business fast as they can, according to the Oregon Office of Economic Analysis. Renters will be left with plenty of choices, as long as they like apartment complexes, due to the extensive and ongoing construction of those buildings. (ADUs on single family home lots are being built in greater numbers as well, but not nearly in the same quantity as apartment units.)
- Mortgage rate gains will not be as quick as predicted. After several years of low mortgage rates, which contributed to the surge of home buying in Portland, many economists were saying that 2019 would be the year the average mortgage is hiked back up to a 5 or even 6 percent interest rate. Although the average rate set by the federal reserve did rise above 4% in 2018, economists are now saying that the Fed will be slow to raise rates in the coming months. The Washington Post has more on why. There is still a good opportunity to get a mortgage rate under 5% in 2019.
- Down payments can be leveraged for first-time and low-income home buyers. Home buyers who can put more down up front tend to get a better mortgage rate, but saving up for a down payment is one of the hardest parts of buying a home for the first time. Fortunately, there’s an array of first-time homeowner programs in Portland, so the down payment you can afford may actually be more than you think. Check out our recent article here.
- Changing zoning rules mean that more homeowners can also be landlords. For most families moving into a Portland home, renting out a room to help make the mortgage is not usually a reasonable compromise to make. However, Portland has been making national headlines with its innovative and density-oriented zoning changes, allowing Accessory Dwelling Units to be built on more properties than ever before. Ask your real estate agent to help you find a home where this is an option, and get some mortgage help in the form of a renter!
Curious what your current rent might buy if it was a mortgage payment instead? Contact our top 1% Portland buyers’ team today — we will be happy to answer your questions.January 11, 2019