The Portland Real Estate Market - What's The Future?
Portland home prices have lead the country in appreciation rates for 11 months in a row now. It's been pretty amazing to watch and to witness on a daily basis here at Home Team Realty. A 11.7% price increase over last year at this time establishes the average Portland metro home value at $392,200.
More and more we are asked to weigh in on where we think the local Portland real estate market is heading. Last Fall and this Spring, it seemed like everyone was expecting the market to continue its rapid upward trajectory and there was less hesitation for buyers at price points across the board.
As prices continue to rise, the certainty that it will continue has given way to increased trepidation and doubt. While no one has a clear view to the future ahead, some good, ol' fashioned data and information can provide some clarity and at least something on which we can base our opinions.Let's look at the basics of supply and demand to help us attempt to forecast the future.
According to Wikipedia, Portland has had the following populations:
Portland, 2010: 583,776
Portland, 2015 (estimate): 632,309
Metro*, 2010: 2,389,228
*The metro region is made up of 7 counties - Clackamas, Columbia, Multnomah, Washington, Yamhill counties in Oregon and Clark and Skamania in Washington.
2 years ago, The Oregonian published an article expressing that the metro region's population might increase by as much as 725,000 people by 2035.
The added 725,000 people would create a 31% population increase in under 20 years. That's 31% more demand based on population growth alone.
Anyone who lives here has seen the changes, has read the headlines, experienced the expansion first hand. It's changing, people are moving here in droves. If the projections are on target or at least in the ballpark, that sort of growth will continue, thereby increasing demand and need for housing.
So what about the housing supply?
Many of you are well aware of urban growth boundary that limits the amount of land to be utilized for housing in the region. You can see the map here. Unlike many areas of the country that have urban sprawl in all directions, this region is limited in where it can grow.
I couldn't find any projections of new home supply growth into the future in Portland, so I've done some estimating on how many new homes will need to be built to match demand. I admit it's a very rough estimate, but I think it'll do for this exercise.
In 2015, there were an estimated 124.59 million homes in the United States and there were about 320 million people in the country. So that's .389 homes per person, or 282,025 new homes needed in the next 20 years (0.389 x 725,000 in population growth). That's a lot of homes...over 14,000 each year for 20 years.
So we have a market with a very high rate of population growth, limited land on which to build and a very high number of new homes that need to be built - it seems to me that rising home values are here to stay for awhile.
For those that doubt it can keep rising and rising, University of Oregon economics professor Tim Duy states, regarding appreciation rates, "There's no fundamental law that says it has to end anytime soon. And it won't end until we have more balance between supply and demand in the housing market."
Parenthetically, one thing I've been thinking lately is that I can't imagine the populace of San Francisco, some 30 or 40 years ago, could even start to imagine the housing market developing and appreciating the way it has. Will Portland do the same, to one extent or another?
We can only make informed suggestions and educated guesses and have no way to be sure how to answer the tough questions we get on where the Portland market is heading. Much larger and substantially more complicated national and international market forces and future acts of God are simply out of our control and prognosticating ability.
Rest assured, though, we are always here to help and will answer your questions as best we can, armed with our collective decades of experience and constant attention to the market's trends and data.
If you have a differing opinion or other reasons that I haven't addressed on why we indeed can expect long term market appreciation, we would love to hear your opinion and reasons why! We are always seeking to learn and hear different perspectives, so please reach out to us with your thoughts!
Until next time, happy house hunting!
Lead Buyer's Agent