Top 5 Real Estate News Stories of 2023 so far.

It’s been a riveting year in the Real Estate industry as we approach the end of the first half of the year. Global trends and local nuances intertwine to shape a narrative that’s as complex as it is fascinating. We will explore the top five real estate news stories 2023, each bearing significant implications for homeowners, investors, and industry professionals.

First, we’ll examine the financial changes shaking the mortgage industry as rates have climbed to their highest level in 13 years. This macroeconomic shift is sending ripples across the housing market, affecting everyone from first-time buyers to seasoned investors.

Next, we’ll explore the seemingly unstoppable rise in home prices. With values reaching record highs, we’re left questioning what’s driving this trend and what it means for the affordability of housing in the future.

Our third topic shines a light on the COVID-19 pandemic’s lasting impact- the rise of remote work. This new norm is not just transforming our work habits but is also redefining where and how we choose to live, driving demand in surprising new locales.

From here, we’ll focus a little closer to a particular city that’s experiencing some unique challenges – Our Beloved Portland, Oregon! Despite its appeal to remote workers, Portland has been grappling with a recent decrease in population. We’ll dive into how this unexpected demographic shift is impacting the city’s real estate market.

Lastly, we’ll delve into the acceleration of co-living and co-working trends. In a world where flexibility has become key, the appeal of these dynamic living and working arrangements continues to grow.

From economic impacts to lifestyle changes, we keep you abreast of the most vital and newsworthy trends in the world of real estate in 2023. So, whether you’re a potential homebuyer, a real estate enthusiast, or just keen to understand the shifting sands of this dynamic market, keep reading for some intriguing insights.

Mortgage rates rise to the highest level in over 20 years. 

In Oct 2022, mortgage rates reached their highest point in over twenty years, with the average rate for a 30-year mortgage hitting 7.08 %, according to the Federal Reserve Bank of St. Louis’ research center.

Source: Federal Reserve Bank of St. Louis’ research center

The significant increase in mortgage rates was due to rising inflation and the Federal Reserve’s decision to hike interest rates and fight off rising inflation.

Inflation – the general increase in prices – has been affecting every aspect of the global economy. It has raised the cost of goods and labor and has now spilled over to the mortgage industry, leading to higher rates. This rise in mortgage rates means higher monthly payments, making homes less affordable for buyers.

This increase in mortgage rates has important effects on the housing market and the larger economy. With higher costs, fewer people can afford a home, which is one factor that has slowed down the housing market. This also negatively impacts industries related to housing, like construction, and all those services that help close real estate transactions.

Although the rise in rates could cause a deflationary period in the economy, one strong indicator that the economy is not headed for a recession or a crash is: Low Unemployment. As of April 2023, the US unemployment rate was 3.4%, a 50-year low. So while prices are rising, the great news is there are plenty of jobs.

These changes in mortgage rates and their impact on the housing market and the economy are something to watch closely. We’ll keep an eye on how these factors affect the real estate market and keep you updated.

Home prices continue to rise.

 The United States has experienced an unprecedented rise in home prices, with the median price reaching $436,800 in Q1 2023, marking a 15.4% increase from a year prior, and a whopping 28.1% from just three years ago.  The dual pressures of low housing inventory and robust demand largely drives this surge.

Source: Federal Reserve Bank of St. Louis’ research center

Portland, Oregon, a city known for its attractive living environment and vibrant culture, closely resembles this national trend. In April of 2023, the Median Sales Price of homes in Portland was $524,900, a slight decrease of 5/4% from the same period in 2022 and a healthy increase of 15.6% from three years ago.

Source: Federal Reserve Bank of St. Louis’ research center

Portland’s housing market has seen significant growth in recent years, with housing prices climbing steadily. The city’s appeal, stemming from its thriving tech scene, cultural vibrancy, and natural beauty, has attracted an influx of new residents and is boosting demand. This strong demand, coupled with a limited supply of houses on the market, has been a key factor propelling housing prices upwards.

Now, let’s look at why housing inventory in Portland is so low! Well, it can be attributed to several factors. First, new construction has struggled to keep up with the surge in demand, a challenge that is only compounded by rising construction costs and labor shortages. Secondly, many existing homeowners are reluctant to sell, often due to concerns about finding a new home in this competitive market, which tightens the inventory further.

On the other hand, the demand is fueled by a combination of local and external factors. The city’s growing tech sector has drawn a considerable influx of professionals seeking employment opportunities. Additionally, the shift towards remote work, which began due to the COVID-19 pandemic, has led many individuals to reconsider their living arrangements. With the ability to work from anywhere, many are choosing cities like Portland without the exorbitant costs associated with major tech hubs like San Francisco or Seattle.

This scenario of high demand and low supply has intensified competition among homebuyers, often resulting in bidding wars that push prices even higher. This situation presents significant challenges for many first-time buyers and those with limited budgets.

Ultimately, the housing market in Portland, much like the rest of the United States, is marked by rising home prices driven by low inventory and strong (but softening) demand. Understanding this market’s unique dynamics is vital for buyers and sellers navigating the Portland housing landscape as these trends persist. As always, potential homeowners and real estate investors must stay informed and strategize effectively to make the most of this bustling market.

The rise of remote work.

The COVID-19 pandemic triggered a profound shift in how and where we work, with remote work becoming the new norm for many. This shift has significantly influenced the real estate market, reshaping buyer preferences and altering demand dynamics across regions. 

One of the most visible impacts of the rise in remote work is the migration away from major city centers. With people no longer needing to live near their workplaces, many are choosing to move to more affordable areas or places with a higher quality of life. As a result, there’s been an upswing in the demand for homes in rural areas and smaller towns. 

Portland, Oregon, serves as an excellent example of this trend. Known for its diverse culture, eco-friendliness, and scenic beauty, Portland offers a lifestyle balance that’s particularly appealing to remote workers. Its relatively affordable housing compared to larger cities like San Francisco and Seattle and its high quality of life have made it a sought-after destination for those seeking a change. 

Over the past few years, Portland’s suburbs have experienced a significant increase in demand, while Portland city property has experienced a slight decline. Portland suburbs have become hot commodities, often selling above asking price in competitive bidding wars. This has been fueled by the influx of remote workers moving out from more expensive cities, looking to take advantage of the suburb’s comparatively lower cost of living and vibrant cultural scene that still exists outside the city center. 

Simultaneously, the shift to remote work has caused a slowdown in some real estate market sectors. For instance, demand for office space in major cities has dropped significantly. While some companies maintain a physical office presence, many choose to go fully remote or adopt a hybrid work model, reducing the need for large office space. 

However, this also presents an opportunity for the transformation of these spaces. Unused or underused office buildings in cities could be repurposed into residential housing or mixed-use properties, potentially alleviating some of the housing shortages seen in many areas.

As remote work continues to be a mainstream part of our lives, its effects on the real estate market will likely continue to evolve, presenting both challenges and opportunities for the industry.

The impact on the real estate market of decreasing population in Portland.

Portland, a city renowned for its vibrant culture and appealing quality of life, is facing an unexpected challenge – a declining population. According to recent data from the U.S. Census Bureau, Portland lost over 18,200 residents between the onset of the COVID-19 pandemic and the summer of 2023, marking it as one of the fastest-shrinking cities in Oregon. This trend presents a bit of a paradox for a city that was previously on a steady growth trajectory. This trend holds potentially significant implications for the local real estate market.

So why the exodus from Portland? One primary reason may be the rise of remote work. With many jobs no longer tethered to specific geographical locations due to the pandemic-induced work-from-home shift, people have the flexibility to reconsider their living situations. Many are choosing to move away from city centers, seeking lower living costs and more spacious homes available in suburban and rural areas.

Another contributing factor could be the city’s handling of various social and economic issues. Like many urban areas, Portland has grappled with issues such as homelessness, affordability, and social unrest, which may have prompted some residents to seek more stable environments.

The decrease in Portland’s population inevitably affects the city’s real estate market. As residents leave, the demand for housing within the city could potentially decline, leading to a slowdown in price increases. This could, in turn, make the city more affordable for new buyers or renters who have been priced out of the market in recent years.

However, while some may see this as a sign of trouble for Portland’s real estate market, others see potential opportunities. Lower prices could attract new investment into the city, driving revitalization efforts and contributing to the city’s long-term growth. Moreover, the departure of residents also opens up opportunities for policy adjustments and infrastructure developments to address the issues that may have prompted the exodus.

Despite the current trend, it’s important to remember that Portland has a host of strengths, including a robust job market, a rich cultural scene, and an appealing natural environment that continues to make it an attractive place to live.

As we adapt to the lasting effects of the COVID-19 pandemic, the year 2023 has seen a distinct acceleration in the co-living and co-working trends globally, and Portland, Oregon is no exception. This city, known for its progressive culture and innovative lifestyle trends, has seen a significant rise in real estate offerings in this sphere, signaling a shift in how people choose to live and work.

The co-living trend, which merges private living spaces with shared amenities, has been fueled by factors such as high housing costs and the desire for community connectivity. Professionals, in particular, have been attracted to this model, finding value in the shared resources and the social interactions that co-living provides.

Portland has made numerous recent zoning changes to foster co-living situations and higher population density in general. While some property developers in Portland are taking advantage of these changes, residential development rates are currently low in Portland.

While the pandemic triggered this shift, the trends of co-living and co-working are likely to endure as they align well with societal shifts towards more flexible and community-focused living and working arrangements. As these trends continue to gain momentum, the real estate landscape in Portland and worldwide will continue to evolve, shaping the future of urban living and working.

What’s next in the 2023 real estate market?

Generally speaking the spring and summer months are the best time to sell a home in Portland, Oregon and the fall and winter are the best seasons to buy a home in our market. We are moving from a fast moving spring season with rising prices to a slower and more balanced summer, then likely a softening in the fall and winter. Thankfully mortgage rates have likely peaked and whenever they do finally drop (be it 2024 or later) our Portland real estate market is poised to jump, given its persistent low inventory.

If you’re considering moving in our real estate market, it can be tricky to figure out what these changes mean for you. That’s where we come in. Our top 1% sellers agents would love to schedule a no-obligation appointment to view your home and give our best advice. Our top 1% buyers agents would love to hear what you’re looking for.

Don’t worry if you’re unsure about your next real estate step – we’re only halfway through the year, and there’s plenty of time to make a smart move. If you’re dreaming about a new home, wanting to sell, or looking for a good investment, just give us a call.

June 5, 2023
AUTHOR

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.

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