Housing Inventory = Number of Closed Transaction/Number of Active Listings = Two point five months! The last time we saw Portland Metro housing inventory this low was in May, 2006. May’s RMLS Market Action tells us that every metric of the Portland real estate market is strengthening. Days on Market is 85 days compared to 152 days in January of 2009 when we also had 19.2 months of housing inventory.
Close in areas have even lower inventory:
- North Portland: 1.9 months
- NE Portland: 1.9 months
- SE Portland: 2.1 months
- West Portland: 2.3 months
- NW Portland: 2.0 months
- Lake Oswego/West Linn: 3.1 months
- Beaverton/Aloha: 1.5 months.
- Tigard/Wilsonville: 2.1 months
Most striking is Beaverton/Aloha’s 1.5 months. We’ve typically seen the close-in Portland areas with the lowest inventories but recently we’ve seen the ‘burbs competing for the tightest inventory title.
What does it all mean? Buyers have to put their best foot forward to compete with other buyers. Multiple offers are not unusually and escalation clauses are used by some agents though I would argue against their use (an escalation clause says that buyer is willing to pay $X over the next highest offer). Rapid increases in prices can cause appraisal issues. If the appraiser can’t find comparable sales to support the price there may be problems: is the buyer going to bring in the difference? Is the seller going to agree to lower the price? With a cash deal, no appraisal is necessary which strengthens the “cash is king” theory which means financed offers need to compete on other terms.
Potential sellers have reasons to be optimistic about the current market. An accurately priced house is going to sell in any market but this market is stronger than anything we’ve seen in the last five years. Will it continue to run up? For how long and will it level off or dive? The winter months could be concerning as typical seasonal declines occur and we should start to have a clearer picture of how new laws and court rulings impact the foreclosure market. There are very few REO properties for sale right now, if there is an increase in bank listings it will push market values down as the majority of those properties are typically lower priced.