Clients and Friends,
This report ends the second quarter. We have moved from relentless rain to relentless sun. Paralleling that, our markets have moved from deflated sales and we are getting back to normal sales. It has been an unusual marketplace this year and I characterize it as unpredictable (like the weather). What happened to normal and balanced???
To better understanding the dynamics of our housing markets, you can simply take a drive anywhere in the Portland Metroplex. The city and the suburban areas are filled to the brim with cars and people. Yes, it is peak season for vacations but even with this factored in, our streets, feeder roads, and freeways are chronically full. ‘Rush hour traffic’ has become the norm. The influx of people to greater Portland and ‘demand’ is keeping the price appreciation strong and consistent.
The rest of the marketplace is inconsistent and unpredictable. Since 2016 we have seen the sales volume leveling out and now many of the numbers are falling. This remains the pattern to the end of the 2nd quarter of this year as seen in the reports below.
What is causing these dynamics in the marketplace? Let me suggest a few issues…
- We experienced 7 years of housing industry famine beginning in 2007. The ‘dark years’ ended in Portland in 2012 and a surge of pent-up demand hit us for 4 years. Portland was the fastest growing marketplace in the nation. The surge is over (?) and we are returning to a ‘normal’ marketplace. That is not a bad thing to happen.
- New housing died by 2008. We now have 5 years of the recovery of the new home market. We have seen a tidal wave of new construction and there seems to be no end to this. I hear of several housing developments on the west side of Portland that include numbers like 8,000 homes in one development area, or 200+ acres in the city limits beginning to build out. The housing market is inundated with new homes and that is satisfying the demand and causing the overall numbers to slow down.
- Buyer’s can be credited with some of the changes. Prices have sky-rocketed because of great demand and competition. With the marketplace slowing down and demand spread out over more available homes, buyers seem to be feeling their oats and acting-out! We are seeing fewer ‘bidding wars’ and more offers below asking price. We are experiencing more aggressive negotiations after inspections. Buyers seem to be saying they have had enough of the rising prices (although the prices continue to rise) and being pick-pocketed by Sellers Revenge.
- Finally, we are having an unpredictable year because our past winter was unique and disruptive. We have addressed this in detail in previous reports but we still have some catching up to do with other years. Our Year-To-Date numbers are low because of this. The challenges brought on by the weather etc. might have contributed two dynamics to the marketplace this year: 1) Did they chase away people who were considering moving to Portland? We went from the top market destination for buyers to the 8th destination almost overnight (the last report I heard). 2) Did the cessation of sales during the winter empower buyers to get more aggressive in negotiations (sensing weakness)?
What to do? Some talk of another bubble. Some choose to sit-out of this aggressive market. Some continue to live their lives and move forward with their plans. Obviously, many continue to buy and sell.
The housing market is cyclical by nature. Historically, there are regular surges of growth and then modest down cycles to consolidate. The ‘crash’ cycles are seldom, the last one previous to what we are coming out of was almost 30 years before that. If one backs-out of the current market, Portland may escalate to a very expensive marketplace (jumping up a tier or two); getting back into the market may be impossible. Our prices remain modest compared to all the California markets and Seattle. We are the best value for a metroplex on the west coast. Current buying costs are very low. Interest rates remain historically low (still under 4%). Inflation officially is not an imminent threat.
An update on local sales at the mid-year mark:
In spite of the challenges of the marketplace, our brokers continue to excel at their work in the local communities. After reviewing these two pages we trust you will be pleased to entrust your friends and family, co-workers and neighbors to our professional care. Thank you for your referrals and your generous commendations.
Welcome to the second chapter of 2017. We wish you the very best for you and your goals. We would love to serve you!