I’m still trying to compose myself after heading over to the Portland Business Journal to grab the link to the story discussing Portland unemployment at the bottom of this post. I was shocked to see this headline: “Portland homes prices up 4.3 percent”. What’s truly amazing about it is headlining a positive about the Portland real estate market and not the normal pick-the-worst-part-of-the-report title (“Median Prices Down 1.3%” was what I was expecting to read). Everything must be peachy now… now back to our regularly scheduled RMLS Market Action report.
Most of the monthly metrics for the Portland real estate market were up in February according to the February 2012 RMLS Market Action released today. Inventory dropped from 7.0 months in January t0 6.5 months. In February 2011 there were 10.9 months of listing inventory. The drop comes from a higher rate of sales (up 17.5%) and a decrease in new listings coming to market (-13.6% from February 2011). The jump in pending listings, up 32.5% since this time last year, is encouraging too. The average sales price is up 2.4% to $255,100 compared to January but the median price lost 1.3% to $211,000.
From the “real estate is local” theme inventory levels are considerably lower on the east side of the Willamette River within the city than shown from the five county “Metro Portland” data shown in Market Action:
- North Portland: 4.6 months
- NE Portland: 3.7 months
- SE Portland: 4.8 months
- West Portland: 6.6 months
- NW Washington County: 7.4 months
The average sales price of $255,100 is down from a peak of $355,000 in 2007. That’s pushed affordability rates higher than we’ve seen in nearly a decade.
AFFORDABILITY – According to a formula from the National Association of REALTORS®, buying a house in the Portland metro area is affordable for a family earning the median income. A family earning the median income ($72,000 in 2011, per HUD) can afford 182% of a monthly mortgage payment on a median priced home ($216,600 in December). The formula assumes that the buyer has a 20% down payment and a 30 year fixed rate of 3.96% (per Freddie Mac). [Reporting December 2011, the most current month available]
With low inventory levels, interest rates and other positive signs (Portland unemployment down to (a still high) 8.2%) we still need to be cautiously optimistic about where our market is heading. Last year it looked like the market was on an upswing throughout the first half of the year. That fizzled out and left us mostly flat for the year. Even with less than five months of inventory in certain areas around Portland I don’t think that we’re going to be comfortable with the phrase “seller’s market” for some time. We’re seeing the return of the investor to the market which is increasing the competition for what is already a reduced number of active listings. We’re seeing multiple offer situations more often and other houses going sale pending with just a handful of days on market. That’s due to increased competition but also because sellers are more willing to embrace the importance of accurate pricing and reacting to market feedback quickly. Buyers are going to continue to be afraid of overpaying for property until we have a long run of stability or market increases. Their fear, real or perceived, is going to keep sellers twitchy about getting escrow closed versus losing the buyer and going back on the market. There may have been multiple offers to start but many buyers won’t come back after being rejected once.