The Oregon real estate market is no exception to what has happened to the national housing sector in recent history. Much like the rest of the country, real estate in Oregon is undergoing a significant shit. Previously, the pandemic created an environment where pent-up demand greatly outweighed supply. As a result, local home values have appreciated at a historic rate and are continuing to test new highs each month. That said, the Federal Reserve's latest attempts to reign inflation back in are starting to impact the Oregon real estate market. With mortgage rates more than doubling year-to-date, mortgage applications are declining, and activity is dropping. For all intents and purposes, the Fed’s tightening is working, and activity in the Oregon housing market is taking a hit, which begs the question: Are home prices going to drop in Oregon? Consequently, what do the changes mean for local investors?
The Top Oregon Real Estate Markets
While the best real estate market in Oregon is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 3.7% (latest estimate by the Bureau Of Labor Statistics)
Population: 4,246,155 (latest estimate by the U.S. Census Bureau)
Median Household Income: $65,667 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: One in every 8,282 homes
Oregon Median Home Prices
The median home price in Oregon is $515,439. It is worth noting, however, that prices haven't always been as high as they are today. Much like the rest of the country, real estate in Oregon has experienced both ends of the price spectrum since the last recession. Values bottomed out around the first quarter of 2012 because of the Great Recession. Since then, prices across the entire state have proceeded to increase for ten consecutive years.
Appreciation across the Oregon real estate market was most likely the result of the same factors driving national trends: a strengthening economy, improving confidence in the housing market, and a distinct lack of available inventory. The unique combination of these factors increased home values for the better part of a decade. That said, the fastest rate of appreciation has taken place during the pandemic.
Since the first quarter of 2020, when COVID-19 was officially declared a global emergency, the median home value in the Oregon real estate market has increased by about 36%. The faster rate of appreciation was brought about by lower mortgage rates, pent-up demand, and a lack of available inventory. Simply put, competition placed the power in the hands of sellers, who were able to increase their prices at a historic rate.
It is worth noting, however, that the balance of power is shifting in the Oregon housing market. With the Federal Reserve basically doubling mortgage rates year-to-date to fight inflation, mortgage applications have declined. Less activity strips sellers of their control and ability to ask for more. Therefore, it is safe to assume appreciation will slow. That’s not to say prices are ready to come down at the movement, but rather that the pace of appreciation will slow down slightly.
Oregon Median Rent Prices
Rental prices in the Oregon real estate market are directly correlated to local housing prices. While home prices have spent the better part of ad decade, rent prices haven’t been far behind. If for nothing else, higher home values are preventing a large population of prospective buyers from actually committing to a purchase, if not pricing them out of the market altogether.
There is a large contingent of people that want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters. Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. As a result, landlords have found themselves in a position of power and increased their asking rates.
According to Apartment List, the median rent price in Oregon is $1,448. Over the last 12 months, rental rates have increased by approximately 8.3% (just under their home value counterparts). On average, today's renters can expect the following rates:
1 Bedroom: $1,206
2 Bedroom: $1,407
Comparatively, the national average rent price is $1,383, or about $65 less than the Oregon rental market.
As I already alluded to, more people are forced to rent because they can’t afford to buy, but there are also very few units to rent on the market. Therefore, landlords are in a position of power and can request higher rates. Oregon real estate investors should take note. As it turns out, now is a great time to consider buy-and-hold exit strategies. While it makes it more difficult to acquire properties, it’s more than likely that you’ll be able to rent out an asset to recoup some of the money lost on the acquisition.
Oregon Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ latest Foreclosure Market Report, “there were a total of 34,501 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 14 percent from a month ago and up 118 percent from a year ago.”
In August, lenders across the country started the foreclosure process on 23,952 U.S. properties, up 12% from last month and 187% from this time last year.
“Two years after the onset of the COVID-19 pandemic, and after massive government intervention and mortgage industry efforts to prevent defaults, foreclosure starts have almost returned to 2019 levels,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “August foreclosure starts were at 86 percent of the number of foreclosure starts in August 2019, but it’s important to remember that even then, foreclosure activity was relatively low compared to historical averages.”
As recently as August, the Oregon housing market had the fortieth-highest foreclosure rate out of all the states. With a total of 1,813,747 homes, 219 went into foreclosure; that means one in every 8,282 homes is in some state of foreclosure. The counties with the highest distributions of foreclosures were:
Tax Lien Investing
Tax Lien or Deed: Tax Deed state
Redemption Period: 3 years until the state can foreclose
Oregon Real Estate Investing
Years of historic appreciation have worked well for investors. The equity from homes purchased just a few short years ago has most likely made the majority of investments worthwhile. However, the Oregon real estate market (much like everywhere else) is getting to a tipping point. Homes have increased in value so much that attractive profit margins are growing harder to come by.
Outside of acquiring a foreclosure, homes are growing too expensive to flip. That's not to say Oregon real estate investors can't continue to flip homes (they absolutely can), but rather that the new housing market created by the pandemic is more suited for long-term investors. In particular, today's most prominent indicators appear to lean heavily in favor of rental property owners.
While mortgage rates have nearly doubled, year-to-date, borrowing costs can still work in favor of investors looking to buy a rental property. As recently as October, the monthly average commitment rate on a 30-year fixed-rate mortgage was 6.92%, according to Freddie Mac. At that rate, it's still affordable to borrow money. The rates associated with today's purchases will keep monthly mortgage obligations affordable, especially when compared to the rental income a lease can bring in. Investors who use today's rates may increase monthly cash flow and increase profit margins on long-term rental properties.
Today's landlords will also find their assets receiving plenty of attention. The city's distinct lack of inventory means more people will be forced to rent (even those who want to buy will be relegated to the renter pool). Demand for rental properties should increase for the foreseeable future, simultaneously lowering the risk of vacancy and increasing the amount of rent landlords may charge.
Investors are lucky to have several viable exit strategies at their disposal, but none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing toward becoming a buy-and-hold investor in Oregon to ignore.
Oregon Housing Market Predictions
The Oregon housing market has done very well for itself. For the better part of a decade, in fact, real estate in Oregon has exhibited many of the same characteristics as its national counterparts. Price increases, confidence in the market, and several other indicators are in line with national trends, but what does that mean moving forward? What can the Oregon real estate investing community expect moving forward?
Secondary cities will receive more attention: Portland has seen demand increase dramatically in recent history. In doing so, prices have increased alongside the competition. It is now fair to assume secondary cities like Bend and Salem will start receiving more attention. Appreciation in smaller cities has yet to reach the same level as Portland, which will attract a lot of first-time buyers. Cheaper home values will then drive up competition in areas where it wasn't before.
Historic appreciation will continue: Despite the pandemic, real estate in Oregon remains red hot. As it turns out, pent-up demand was enough to maintain an active housing sector. However, there simply aren't enough listings to keep up with demand. As a result, sellers will increase asking prices to line up with the competition. That said, higher borrowing costs will bring down competition and perhaps even strip sellers of their grasp over the housing market.
The Oregon real estate market has been on fire over the last 10 years, not unlike all of its West Coast counterparts. Since the Great Recession, nearly every economic indicator is better off than even just a few short years ago. Even the introduction of the Coronavirus couldn't interrupt positive Oregon real estate market trends. While uncertainty in the first quarter of 2020 may have stalled real estate activity, the setback was only temporary. Instead of resting on its laurels, Oregon actually used the disruption to its advantage. While inventory remains a problem, the housing market is doing its best to move forward, and anyone who gets in now will be happy they did sooner rather than later.
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