My favorite time of the year is summer in Oregon and this summer is shaping up to be one of the best in the last five years. We’ve weathered many years of a tough recession and as the recovery is now in full swing across the country, I wanted to give you a few insights into what I am seeing happening in the Portland market. Let’s talk about inventory shortages, frustrated buyers and price increases.
Everyone is talking about inventory shortages – and to give you a straight answer, we all expected this. Consumers believe we are at the bottom even though market statistics tell us we hit the bottom last year. No one wants to sell at the bottom, so we’re seeing a shortage of homes for sale in the market. The homes that are going on the market now are a result of consumers who want to sell, not the ones the past few years who may have been desperate to sell. Today’s seller doesn’t have to sell, they want to sell and move up, move on or change their housing needs. The recent Market Action report from RMLS has Portland inventory at 2.5 months. 6 months inventory on the market is considered a balanced market.
Which leads to frustrated buyers. Inventory shortages lead to buyers not finding the home they are looking for and feeling like they need to “settle.” No one wants to settle or feel they were forced to buy a home that didn’t meet all their needs. A recent Wall Street Journal article cited “low inventory as buyer’s predominant worry.” A new trend we are seeing at Renaissance is that frustrated buyers are taking a new tactic. They are custom building. They can’t find what they want for sale, so they buy an empty lot, or ask us to help them find a lot, and we customize a home that DOES meet their needs, so they don’t have to settle. They get everything they want, just the way they want it. We even have buyers tearing down their old home because they like the neighborhood so much and rebuilding right in its place. Now that is creative!
Which leads to price increases. The Portland market is still 20% below its peak in 2007. With low inventory, the homes that are on the market are commanding higher prices, which leads to a lift in the overall market. More buyers are out there competing for the same homes. The good news is that with the market recovering more sellers are testing the market. Nationally 8% more people put their home up for sale this year than one year ago.
The market has been up and down the past five years. This is yet another hurdle to full recovery. As we ride out the recovery, the market will return to a more normal state but with that recovery expect interest rates to follow suit and rise with it. We’ve already seen a roughly ½ point increase in rates, now hovering around 4%. If you can find the home you want now, lock in a low price and a historically low rate and buy today. You’ll kick yourself in a few years that you didn’t act when you could have.
