The State of Oregon has added 37,400 new jobs over the past 12 months, with solid gains in Construction (+11,600), Education & Health Services (+9,000), and Trade, Transportation & Utilities (+8,000) sectors. Year-over-year, employment in Oregon has risen 2.0%.
In September, the state unemployment rate was 4.2%—up from 3.7% at the end of the second quarter but down from 4.9% in September 2016. The civilian labor force continues to grow and I fully anticipate that the state’s economy will perform well in 2018, though somewhat slower than 2017.
HOME SALES ACTIVITY
- Third quarter home sales dropped by a very modest 1.5% when compared to the same period last year, with a total of 18,724 homes sold.
- Sales rose the fastest in Klickitat County, which had a 34.3% increase over the third quarter of 2016. There were also noticeable sales increases in Lincoln, Polk, Klamath, Clatsop, and Hood River Counties. Home sales fell the most in Tillamook, Washington, and Wasco Counties.
- Year-over-year sales rose in 13 counties, but dropped in the other 13.
- The low level of available inventory continues to affect the market, causing sales to slow.
- The average home price in the region rose 9.4% year-over-year to $368,292. This is also up 1.5% from the second quarter of 2017.
- Skamania County led the market with the strongest annual price growth. Homes there sold for 31.4% more than a year ago.
- All counties other than Wasco County experienced rising prices when compared to the third quarter of 2016, and a majority saw significant, double-digit increases.
- Interest rates in the third quarter dropped by one tenth of a point from Q2, which likely allowed home price growth to rise at a faster rate than earlier in the year.
DAYS ON MARKET
- The average number of days it took to sell a home in the region dropped by 14 days compared to the third quarter of 2016, and was down 9 days from the second quarter of this year.
- The average time it took to sell a home in the region last quarter was 67 days.
- Only four counties saw the length of time it took to sell a home rise compared to a year ago, but I do not see this as a major issue.
- Homes sold the fastest in Washington and Multnomah Counties, where it took an average of just 21 and 24 days, respectively, for homes to sell.
The speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. Housing markets throughout Oregon continue to benefit greatly from the healthy regional economy.
The Oregon/SW Washington housing market remains remarkably strong and, given that inventory levels are unlikely to increase as we head toward the end of the year, sellers remain in the driver’s seat. I have, therefore, moved the needle slightly more toward sellers for the third quarter.
Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.
Homes for Sale vs. Homes Sold – July 2016-2017
This real estate market graph shows residential detached homes for sale versus homes that have sold in Portland, OR area codes 97212, 97213 and 97232 from July 2016 to July 2017. These area codes cover the Hollywood district and surrounding neighborhoods. In just one year Portland has seen a 40% increase in residential detached homes for resale. Of that 40%, 31.7% sold.
The market had a slight decrease in the winter months but spiked when the weather heated up. In July 2017, Portland saw the highest amount of homes on the market at 147 homes for sale. What is the probability of those 147 homes selling? The summer season is one of the more popular times to sell homes because the weather is nice and it is more enticing to roam around the city.
*Days on Market
This table shows the number of DOM (Days on Market) for each month of home sales. The highest the DOM, the fewer homes were for sale. For the month of July for both 2016 and 2017 the market saw the fewest DOM of homes for sale. From this trend, we can conclude that the selling rate is not moving from its already fast pace of sales.
There are two common concerns about the housing market that one hears from both consumers and real estate professionals alike. First, they question whether or not we are on the brink of another housing bubble, and second, they want to know why there aren’t more homes for sale.
I don’t plan on addressing the concern regarding a housing bubble in this article except to say that we are not currently in “bubble” territory, although affordability does concern me immensely. Today I would like to concentrate on the second question about the lack of homes for sale.
According to the National Association of REALTORS®, there were 1.96 million homes for sale in the United States in May 2017. When adjusted for seasonality, this falls to just below 1.9 million which is essentially the same level we saw back in 2000.
Now consider that the country has added over 21 million new households during that same time period, and you can see why this is so troubling. It is worth noting that many of these new households did move into rental properties, but this still leaves the U.S. with a substantial housing shortfall, which explains why demand for homes is so high.
With the shortage of homes for sale, you would normally expect builders to meet this pent-up demand with new construction housing but, unfortunately, this has not been the case. In fact, new single-family housing starts are running at about 800,000 (annualized), and I believe we need starts to come in at over 1 million to satisfy demand – especially as older Millennials start to create households of their own and begin thinking about buying instead of renting.
We therefore have a quandary. Trust in the housing market has clearly returned, but there are not enough homes to meet the demand of buyers, and when a buyer does find a home, they are met with very stiff competition, which is driving prices increasingly higher.
So why are we in this position and how do we get out of it?
In reality, there is no single reason for the situation we are in today. Rather it is a number of factors that, when combined, suggest to me that the market will not return to equilibrium any time soon.
The first reason for the shortfall is purely demographic. As “Boomers” age, they are not following the trends of previous generations. Many are staying in the workforce far longer than their predecessors, and, as they are postponing retirement, they do not feel compelled to downsize. In fact, almost two-thirds of Boomers plan to age in place and not move even after retirement. Without this anticipated supply of homes from downsizing Boomers, there aren’t enough homes for move-up buyers, which in turn limits the supply of homes for first-time buyers.
Secondly, as a nation we just aren’t moving as often as we used to. When I analyze mobility, it is clear that people no longer have to relocate as frequently to find a job that matches their skill set. There has been a tangible drop in geographic specificity of occupations. Where we used to move to find work, this is no longer as prevalent, which means we are moving with less frequency.
Thirdly, as mentioned earlier, builders aren’t building as many homes as they could. This is essentially due to three factors: land supply/regulation, labor, and materials. The costs related to building a home have risen rapidly since the Great Recession, and this is holding many builders back from building to their potential. Furthermore, in order to justify the additional costs, many of the homes that are being built are larger and more expensive, and this is no help for the first-time buyer who simply can’t afford a new construction price tag.
Fourthly, while the general consensus is that home prices have recovered from the major correction that was seen following the recession, this is actually not the case in some markets. In fact, there are 32 U.S. metro areas where home prices are still more than 15 percent below the pre-recession peak. As equity levels remain low, or non-existent, in these markets, many would-be sellers are waiting until they have sufficient equity in their homes before putting them on the market.
And there is still one more issue that is certain to become a major factor over the next few years: interest rates.
Imagine, if you will, the country a few years from now when interest rates have normalized to levels somewhere around 6 percent. Now consider potential home sellers who are happily locked in at a mortgage rate of about 4 percent who are considering their options. Will they sell and lose the historically low rate that they currently have? Remember that for every 1 percent increase in rates, buyers can afford 10 percent less house. If they don’t HAVE to sell, their thoughts may lead to remodeling rather than moving. I think that this is a very reasonable hypothesis which could lead us to see low inventory levels for a lot longer than many think.
With little assistance from the new home market, I believe we will suffer from low inventory levels until well into 2018.
Our best hope for a more balanced market lies with builders, so hopefully they’ll be allowed to do what they do best – build more homes.
Adapted from Windermere Blog
Housing Wire reports on Black Knight Financial Services stating the top 7 metro areas with the highest home price increase and surprisingly, Portland, OR is not one of them.
Home prices increased in May from the previous month and the previous year, according to the latest Home Price Index from Black Knight Financial Services.
Home prices hit yet another new peak in May, marking a total gain of 4.6% so far in 2017. Annually, home prices increased 6.1% from May last year to $278,000. This marks an increase of 1.1% from April.
The Black Knight HPI uses repeat sales data from its records data set and its loan-level mortgage performance data to produce home prices for disclosure and non-disclosure states.
Home prices increased in every state and in the 40 largest metros in the U.S., while 11 of the top 20 most populous states and 20 of the 40 largest metros hit new peaks.
Here are Black Knight’s top seven metros with the highest home price increases in May:
7. Gainesville, Florida – 1.8%
6. Stockton, California – 1.8%
5. Walla Walla, Washington – 1.8%
4. Tallahassee, Florida – 1.8%
3. Buffalo, New York – 1.8%
2. Carson City, Nevada – 1.9%
1. Spokane, Washington – 1.9%
It seems the largest increases in home prices growth are occurring outside of the major cities. Not one of the top seven cities with the most price growth appears on Black Knight’s list of the 40 largest metros.
Among the nation’s top 10 largest metropolitan areas, ranked by population, home price growth ranges from 0.6% monthly to a median home price of $412,000 in the District of Columbia to an increase of 1.4% to $258,000 in Dallas.
PORTLAND, Ore. – Anyone who lives in Portland knows that home prices have been spiking over the past few years. Now, one of the top financial agencies named Portland as the city with the highest-rising home prices in the nation.
The S&P Dow Jones Indices released data showing home prices in Portland have grown 11.8 percent year-over-year in January 2016.
Seattle and San Francisco took the number two and three spots, with a 10.7 percent and 10.5 percent increase, respectively.
On average, home prices in cities across the country rose 5.7 percent. The S&P Dow Jones Incides reported the western part of the country had the largest price gains, while the northeast had the weakest gains.
The booming market is also making it hard for new buyers to get into homes.
"While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers,” said David Blitzer, Chairman of the Index Committee. “The issue is availability of credit for people with substantial student or credit card debt.”
Blitzer said home prices are rising at twice the rate of inflation.
While Portland homes are getting more expensive, rents are intensifying even more quickly. According to data from Zillow, the average rent for all Portland homes has risen from $1563 to $1770 between January 2015 and 2016, an increase of 13 percent.
-Courtesy of KGW