Portland's hot housing market is cooling off

By Elliot Njus | The Oregonian/OregonLive | Posted July 20, 2018 at 05:00 AM | Updated July 20, 2018 at 09:36 AM

Doug Wicks put his Northeast Portland house on the market on Sunday and had a couple of offers by Tuesday. 

There was no bidding war. No all-cash offers from developers. No plates of cookies, like a neighbor had received from a desperate buyer hoping to gain an edge. 

A year ago, the same house probably would've attracted a pile of offers, most of them over asking price. But Wicks isn't sweating it. 

"Two offers certainly meets my needs," said Wicks. "We're going to get asking price or better. We're thrilled. I don't need cookies." 

Summer has brought a dramatic shift in the Portland-area housing market. Sales have slowed. The inventory of homes is growing. Prices continue to climb, but not nearly as fast as in recent years.

Longtime real estate brokers and market-watchers recognize this new normal as something approaching -- well, normal. And that, they say, would be a welcome return to something Portland hasn't seen since before the housing bubble started to form back in the mid-2000s. 

"The bottom hasn't fallen out. The sky isn't falling or anything like that," said Chris Guinn, the co-owner of Dwell Realty in Northeast Portland. "Sellers have had a pretty good five, six, seven-year run. It's almost overdue."

In June, the Portland area saw 3,187 home sales, a decline of 7.6 percent from a year earlier. The median sale price, meanwhile, climbed 7.2 percent to $417,900.

There were more than 6,000 homes on the market, the most the metro area has seen since 2014. But if sales continue apace, that's just a two-month supply, at least three months short of what's generally considered a balanced market. 

Still, the bolstered supply of homes means buyers will have more leverage than they've become accustomed.

More homesellers are dropping prices, realizing after they fail to net an offer that their homes might not have appreciated in value as much as they expected. (Don't fret for those homesellers, though. Their homes have grown in value by 31 percent, amounting to tens of thousands of dollars, over the 10 years the U.S. average seller has owned their home.)

Buyers, meanwhile, might have the luxury of taking some time to think -- a big change from recent years, when many felt the only way to buy a house was to make an offer on sight.

"With more inventory, there's going to be more choice," said Matthew Gardner, chief economist at the real-estate firm Windermere. "It's going to be less frenetic, and people are not going to have to stop whatever they're doing when their broker calls and says, 'You need to see this house in the next two hours or you'll lose it.'"

They might also have more room to negotiate, Guinn said. 

The slowdown hasn't been felt evenly across the market. There's still far more competition at price points below $400,000, where most buyers are looking for their first home. It's become far harder to find buyers in the move-up and luxury price ranges. 

And the shift away from a seller's market isn't a nationwide phenomenon. Most of the country is feeling the effects of a housing shortage, the result of which includes rising home prices and a frenetic sales pace. 

Portland is an outlier on the West Coast, said Aaron Terrazas, an economist for the real-estate website Zillow. No other major coastal city has seen such a dramatic cooling. 

That's in part because Portland's demand for homes in recent years hasn't been quite as dramatic, and the supply hasn't been quite as logjammed. 

"Portland has seen a lot of job growth and newcomers, but nowhere near the extent of other markets like Seattle or Denver or Salt Lake," he said. 

The cooldown might suggest Portland's housing prices might have grown beyond what its wages can actually support, said Tim Duy, director of Oregon Economic Forum at the University of Oregon. 

The region's apartment-building spree, meanwhile, has slowed the rising rents. That's eased the pressure for some renters seeking the financial stability of homeownership, and it might have pushed some owners of rental houses to sell.

Is it time for homeowners to start worrying about a major correction? Probably not, economists say. 

Despite the slowdown, prices are still rising. The increases to date have been supported by rising incomes rather than lax lending standards. And the supply of homes remains low by historic standards. 

 "We aren't as vulnerable as we were during the housing bubble," Duy said. "Right now, it's a reversion toward a more normal market."

-- Elliot Njus

enjus@oregonian.com
503-294-5034 
@enjus

Source: https://www.oregonlive.com/expo/news/erry-2018/07/e0965abdb71878/portlands-hot-housing-market-i.html