Taking Inventory of the Portland Real Estate Market
The real estate industry keeps track of how it’s doing in funny ways. Mortgages are always going above or below water, but they never seem to get soggy. The real estate blogs are constantly searching for the mysterious “bottom of the market” (it must be down here somewhere!) Then there are the economic factors we like to pay attention to, the bulls and bears and consumer confidence indexes.
Inventory is one of those head-scratchers in the real estate biz. To give an estimate of how the market is doing, it measures something that would never actually happen: Every homeowner decides they never want to move again and no new homes come on the market. In that case, how long would it take for us to run out of homes to sell, assuming buyers are oblivious to the sudden scarcity?
That’s inventory: The number of days or months it would take to sell all the homes on the market at the rate that buyers are currently buying them. In October, according to the RMLS report for the Portland metro area, which offers enough statistics and charts for even the nerdiest number-lover, inventory was the lowest it’s been since 2009.
What was that magic inventory number? 3.8 months. At the rate Portland home sales have been going the past few years, that’s pretty low. In fact, it’s low everywhere according to Realtor.com, which puts the national median inventory at 3.2 months. (The lowest inventory for October was a mere 21 days in Oakland, CA. The highest was 5.4 months in South Carolina.)
Low inventory in the Portland real estate market is good news for sellers and a nudge to buyers to act fast. Commonly accepted real estate wisdom gives six months as the amount of inventory that would show an even balance between buyer demand and the housing supply. So it follows that when inventory is higher than this, sales will be slow and a buyers’ market will result. When inventory is low, as it is now, demand for homes is up, and we call this a seller’s market.
What are the practical consequences of the current low inventory of Portland real estate? Buyers will need to act fast when they see a home for sale that they would consider buying. By the time you get your offer in, there may already be several others. In this case, according to a recent article in the Oregonian, sellers are choosing the best offer based not only on price but also on how likely the deal is to reach closing. Having the right Portland buyer’s agent can help because if he or she has previously worked with those involved in the transaction – mortgage lender, assessor, seller’s agent, etc. – things tend to go a lot more smoothly. For sellers, it’s more important than ever to have a good Portland real estate agent to juggle the multiple offers.
It might be easy to look at the most recent Portland RMLS numbers and assume the real estate market has recovered from the 2008 recession. Not only was inventory down in October, but prices were up, total market time was down, and sales remained steady. However, a low inventory for several months in a row is not necessarily a good thing. One could speculate that if buyers are not finding the homes they are looking for in Portland, they will look elsewhere. That could mean a drop in sales and, subsequently, prices.
On the other hand, if the market does remain strong, we might see a rise in prices as we move from winter to summer, when buyers tend to come out of the woodwork. So there’s no time like the present to put your home on the market or launch your Portland home search. Contact your Portland real estate agent to get started!December 3, 2012