Top 5 Portland Real Estate Market News Stories so Far 2022
Keeping an eye on the market—both nationally and locally—is what we do. Especially over the past couple of years. It’s been hard to anticipate real estate market trends because we’ve been in—still are in—times we’ve never seen before.
Now that we’re half-way through 2022, we wanted to provide an update on Portland’s real estate market trends, compared with national models, and see what it all might mean for the remainder of the year.
While there’s some disagreement about how the market will pan out for 2022 nationally, we can look at the big picture and draw some conclusions about what might happen here in Portland.
Here, we offer the top five real estate news stories at 2022’s half-way mark to help tell the story.
1. Fed’s Rate Hikes Continue to Rise, Increase Portland Mortgage Rates
In June 2022, the Fed’s announced the biggest rate hike we’ve seen since 1994—three-quarters of a percentage point. Significant, to be sure, especially following the quarter-point and half-point increases in March and May, 2022, respectively. The increases are a response to the ever-increasing inflation we’re seeing, affecting consumers in several areas: groceries, gasoline, rent, airfare prices, and a multitude of services. The Fed’s goal: to diminish consumer demand through higher prices and bring inflation down.
The U.S. Bureau of Labor Statistics (BLS) reports that consumer prices were up by 8.5% at the end of March 2022, compared to March of 2021, representing “the largest 12-month advance since December 1981.”
While the Fed rate hikes aren’t tied directly to mortgage rates, lenders (mortgage and otherwise) increase their rates alongside the Fed hikes in an effort to mitigate potential loss from their investments. Some say these hikes were a mistake, but the reality is that they’re here, and their domino effect can’t be denied.
Regarding mortgage interest rates, experts are predicting them to finish 2022 anywhere from 4.8% to 5.5%, with some projecting rates as high as 7% as lenders strive to maintain pace with the upcoming four additional predicted hikes by the end of 2022.
So what does this all mean for the Portland real estate market?
According to bankrate.com, as of the writing of this article, current rates in Oregon are 5.87% for a 30-year fixed, and 5.08% for a 15-year fixed. U.S. Bank shows Oregon rates at 5.5% for a 30-year fixed and 4.875% for a 15-year fixed. Keep in mind that these fluctuate daily.
Compare these rates to the the 2.65% we saw in early 2021, and you can start to see how the relationship between the hot seller’s market, the current rate of inflation, and the Fed’s hikes are conjoining to complicate the market for Portland residents.
2. Portland is Seeing the First Signs of a Shift in Real Estate Supply and Demand
We started 2022 off with an average home sales price of $584,100 in the Portland metro area (a 10.5% increase from the beginning of 2021). This rose to $605,600 in April and now sits right at $615,600, according to the most recent RMLS report.
While prices continue to rise in the Portland metro area, buyer competition for the low inventory of homes is relaxing a bit, giving buyers a little more breathing room when shopping. The reason for this is likely rising interest rates.
Compare these numbers to last year’s numbers at the same times.
With rising price increases and now, rising interest rates, more and more people are being edged out of home ownership both across the country and here in Portland, keeping concerns about affordability front and center for everyone.
3. Portland is Working to Remedy its Housing Affordability Problem
When we wrote about Portland’s housing affordability rate in the spring of 2022, we reported that Portland is still more affordable than many west coast cities. While this may be the case, there’s no denying that the continuation of increasing home prices in Portland and the fast-rising interest rates are affecting Portland residents’ housing and real estate options.
In fact, for home buyers, the prospects of buying a home in Portland is the worst its been since 2007 right before we fell into the 2008 recession.
On the rental front, things are no better. According to rent.com, current rents in Portland fall between $1,250 (the average for a studio—a 14% increase from this time in 2021) and $2,315. A recent koin.com article says that fleeing Portland in search of cheaper rents is probably futile, unless you go to Salem where you can get a three-bedroom for $1,845, Oregon City, or Aloha. Between 2020 and 2021, the State of Oregon saw an average rent increase from $853 to $1,655.
While this all may sound a bit bleak, don’t lose heart!
With the rate of price increases and the market showing signs of slowing and the market starting to cool, Portland is also taking steps to address its inventory and affordability issues.
4. Portland’s Residential Infill Project is Growing—More Affordable Housing on Portland’s Horizon
The first phase of Portland’s Residential Infill Project, or RIP1, went into effect on August 1, 2021, which gave single-family homeowners the latitude to add more than one ADU to their property, with fewer restrictions. As of late May, 2022, the project was expanded, with Portland city commissioners signing off on RIP2. So, what’s it all mean for Portland homeowners and other residents?
First, to briefly recap the intentions behind RIP1: to open up single-dwelling zones and allow multi-family housing—think: duplexes, triplexes, and fourplexes—while putting limits on the sizes of those structures, legalizing three-story buildings of up to six homes on any lot so long as half of them meet affordability standards. This meant that no only would renters start to see more housing options in the future, but homeowners could create another income stream for themselves while also improving the salability and asking price of their homes.
What RIP2 brings to the table is even more options for infilling, specifically, townhomes and cottage clusters, the latter of which are small single units centered around a common garden/courtyard area.
For those concerned about massive, instant change to the city, Morgan Tracy, project manager for the RIP says it will happen over time as spaces for new construction on existing properties become available.
Without a doubt, the initiatives will shape the city in news ways. For some, this is not good news. It’s hard to let go of what has been and embrace the new. But change is inevitable, and Portland is progressive. Taking what’s been called “one of the farthest-reaching zoning reforms in U.S. history,” the RIP is set to remedy a couple of birds with one stone: the city’s growing population and the lack of affordable housing for many of Portland residents.
Doing away with single-family zoning and making room for the affordable housing Portland needs will allow many residents who would never have been able to afford certain neighborhoods to live there, a nod to balancing the scales of inequity, to a degree.
A report from Up For Growth, a non-profit that “forges policies and partnerships to achieve housing equity, eliminate systemic barriers, and create more homes,’ shows that some have expressed concerns about the potential displacement the new zoning could cause, especially for the city’s minority and vulnerable Black communities. But as they say, current data does not support this concern, with a displacement study claiming the project will decrease low-income tenant displacement by 28%. The report goes on to cite a Johnson Economics study, which estimates the creation of 1,200 homes each year over the usual, which equates to 24,450 homes over the next 20 years, and a drop average rents by $260 per month.
This, of course, is one small step in the direction of fixing the problems of income and housing inequity Portland faces, not the end-all solution.
Learn more about Portland’s new RIP code changes.
5. Home Sales are Slowing Down, Inventory is Increasing
It will take time to reach any sort of neutrality and move us away from the hot sellers market we’ve been in for the past two years. On the national scale, housing supplies are increasing and home sales are plunging, signaling the beginning of a turn to a more balanced market.
Part of the reason for this shift in buyer habits can be attributed to rising interest rates. People are also experiencing buyer fatigue. Nothing stays the same forever: it’s a law of nature. So, yes, things are starting to slow down across the country, and inventory seems to be gradually picking up. If these new trends maintain themselves moving forward, sellers will eventually be forced to lower prices. All this said, though, let’s not forget those rising interest rates, which are creating a sense of urgency for many buyers.
Portland Fall Real Estate Market
Regardless of the slight shift we’re starting to see in the market, we’ll still probably see the seasonal slowing that comes every fall. That means upcoming increased inventory and home price drops. The fall is always the best time of the year to buy a home, read our month by month breakdown here.
Work with an Experienced Portland Real Estate Agent
If all this news has your head spinning, give us a call. Whether you want to sell or buy, we’ll put our almost 20 years of experience in the Portland metro area to work for you. Contact our top 1% seller’s agents or our top 1% buyer’s agents or chat with the bot on our site. We’ll be in touch to give you timely advice.July 20, 2022