The Portland real estate market endured the same fate as the rest of the country during the first year of the pandemic. “Shelter-in-place” orders all but brought real estate in Portland to a standstill no more than two years ago. However, much like the rest of the country, positive signs of activity become more apparent in just a few short months. In particular, Portland housing market trends became the beneficiary of continued buying and selling. The activity generated in recent history is more than enough to get investors excited about 2022 and beyond. In fact, the most encouraging aspects of today’s market are the opportunities being created in the wake of the Coronavirus disruption. The new landscape has created buying opportunities for investors to capitalize on, as long as they know where to look and which exit strategies are the most viable.
Portland Real Estate Market 2022 Overview
Median Home Value: $564,334
Median List Price: $578,667
1-Year Appreciation Rate: +12.7%
Median Home Value (1-Year Forecast): +17.7%
Weeks Of Supply: 4.6 (-0.1 year over year)
New Listings: 774 (+6.2% year over year)
Active Listings: 2,622 (-16.1% year over year)
Homes Sold: 600 (-11.3% year over year)
Median Days On Market: 7.2 (-1.5 year over year)
Median Rent: $1,560 (+11.2% year over year)
Price-To-Rent Ratio: 30.14
Unemployment Rate: 3.4% (latest estimate by the Bureau Of Labor Statistics)
Population (Portland Metro): 652,503 (latest estimate by the U.S. Census Bureau)
Median Household Income: $71,005 (latest estimate by the U.S. Census Bureau)
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Portland Housing Market Trends 2022
The Portland housing market has suffered two setbacks in the last decade: The Great Recession and the introduction of the Coronavirus. Not unlike every other major metropolitan area across the country, real estate in Portland was dealt a significant blow when the housing bubble burst around 2008. Nearly every homeowner lost equity seemingly overnight, and new Portland housing market trends started to emerge. While residents didn’t know it at the time, The Great Recession catalyzed nearly a decade-long housing boom. For more than 10 consecutive years, home values have increased in Portland, along with demand.
The second setback the Portland housing market experienced was the result of the Coronavirus. Government-mandated “shelter-in-place” orders all but brought the local housing industry to a standstill two years ago. Uncertainty and inactivity threatened to put an end to a decade’s worth of growth. That said, the pandemic is now responsible for an entirely new set of Portland housing market trends, not unlike The Great Recession. While housing activity was tempered in the short term following the pandemic, the retraction was only temporary; all the activity taking place before the pandemic returned almost immediately.
In association with a government stimulus and record-low mortgage rates, pent-up demand gave prospective buyers the confidence they needed to get back in the market. Sales returned quickly, despite appreciation rates returning to pre-pandemic levels. As a result, local real estate is expected to appreciate quickly for the foreseeable future. The increase will most likely result from demand (people who sat out of the market during the first part of the pandemic) and a distinct lack of supply. Homebuilders were out of work during most of the pandemic, which only contributed to the already tight inventory supply. It is now safe to assume prices will increase over the next 12 months.
Prices will most likely increase more in suburban neighborhoods, as many people find it easier to abandon metropolitan housing. More specifically, COVID-19 has awarded more people the opportunity to work from home, essentially eliminating the need to live within proximity to an office. In addition to people avoiding Coronavirus “hotbeds” within city limits, that should drive more people to look for suburban alternatives. National trends have already seen people trading city life for suburban neighborhoods, and the Portland housing market doesn’t appear to be the exception.
The Portland real estate investing community should pay special consideration to recent trends. Even the most basic Portland housing market forecast calls for an exodus from city living to “suburbia.” Metropolitan prices may drop, and vacancies could increase as a result. Those looking to take advantage of the latest trends should emphasize suburban areas. However, those in it for the long haul may find prices in the city dropping. If they do, apartments within city limits may be had at a discount.
Portland Real Estate Market Forecast 2022-2023
Portland has followed a similar trajectory as the national housing market—home prices have increased due to lacking inventory and increasing demand. However, in light of the Coronavirus, markets are starting to get a little easier to read. While it is too early to tell exactly what real estate in Portland will look moving forward, it is possible to forecast what is likely to happen.
Here is a look at a Portland housing market forecast which has a high probability of coming true within 12 months:
Home Values Will Increase: Currently at $564,334, the median home value in Portland has increased 12.7% over the last 12 months. The increase is largely attributed to demand that greatly outweighs supply. Moving forward, the same seller’s market is expected to continue, only more lopsided than in months past. Too many buyers will be competing over too few homes in 2022, causing the median home value to increase upwards of 17.7%.
Rents Will Increase: The average rent in the Portland housing market has increased 11.2% over the last year, slightly trailing its home value counterpart. It is worth noting that the increase in home prices and lack of inventory have driven even more people to the renter pool. As a result, it is safe to assume rents will increase at a faster pace than last year, perhaps as much as 13.0%.
Interest Rates Will Increase: Interest rates are going to rise to combat inflation brought about by the pandemic and government stimuli. Rates are already up year to date, and more increases are on the way. Higher borrowing costs will increase competition trying to get in before further increases, which may even drive home prices up faster than anticipated.
Rental Properties Will Be More Popular: Higher acquisition costs, lower profit margins, and a lack of availability are turning more Portland real estate investors to the rental market. Long-term rental properties look to be the better play in today’s market where monthly rents can help offset higher prices. Additionally, the lack of inventory in the housing market will drive more tenants to rental units, effectively reducing the risk of vacancies.
Portland Foreclosures 2022
According to ATTOM Data Solutions’ January 2022 U.S. Foreclosure Market Report, a total of 23,204 U.S. properties received a foreclosure filing (default notices, scheduled auctions or bank repossessions) over the course of January. Per the same report, nationwide foreclosures are up 29.0% from the previous month and up 139.0% year over year.
“The increased level of foreclosure activity in January wasn’t a surprise,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company. “Foreclosures typically slow down during the holidays in November and December and pick back up after the first of the year. This year, the increases were probably a little more dramatic than usual since foreclosure restrictions placed on mortgage servicers by the CFPB expired at the end of December.”
Delinquencies are on the rise, and Portland foreclosures are no exception. Of course, it is too soon to tell just how many foreclosures will hit the Portland housing market in 2022, but one thing is for certain: the number of delinquent homeowners will increase year over year. That isn’t to say Portland is any worse than other markets, but rather that foreclosure activity was at an all-time low last year. Government intervention and foreclosure moratoriums prevented many people from losing their homes. With aid set to expire, increases in foreclosures are inevitable, and Portland real estate investors ready to help will find themselves in a lucrative position.
Portland Median Home Prices 2022
Today, the median home value in Portland is about $564,334. Local home values are the result of several years of appreciation and haven’t always been as high as they are. More than 10 years ago (February 2012), the median home value bottomed out at around $225,000; that means the city’s median home value has appreciated 150.8% in approximately one decade.
To better understand how the Portland real estate market has performed in recent history, it’s best to place it in context with the U.S. real estate market. At the same time, real estate in Portland appreciated 150.8% (February 2012 to March 2022), the median home value in the United States increased 99.8%.
The city’s median home value has appreciated much faster than the national average for the better part of a decade. The difference may be attributed to several factors, but the most prominent indicator appears to be availability. The Portland housing market only has about 4.6 weeks of supply, which isn’t nearly enough to keep up with demand. Supply and demand in the Portland area have increased competition dramatically, and homeowners have increased asking prices accordingly.
The Coronavirus’s impact has yet to reveal itself fully, which begs the question: Is Portland, Oregon a good place to invest in real estate? The current market environment may represent a great time to buy for investors looking to hold for the long term. If for nothing else, interest rates remain historically low and prices are expected to increase for the foreseeable future. Long-term investors who buy rental properties, for example, may be able to capitalize on attractive metrics for years down the road.
Should You Invest In The Portland Real Estate Market?
The Portland real estate investing community has benefited from an overwhelmingly positive decade of growth. Nearly every indicator investors covet has improved dramatically since the first quarter of 2012. Flipping profits have increased, as well as home values and rental rates. Even demand has persisted in the face of increasing prices amidst a pandemic. Yet, against all odds, prospective buyers are still looking to take action.
When all is said and done, a lot has happened in a short period, which begs the question: Is Portland a good place to invest in real estate? The answer is simple: Portland can be a great place to invest in real estate with the right strategies.
While rehabs and flips remain a viable option, years of appreciation have detracted from profit margins in the area. It is absolutely possible to rehab, but today’s major indicators point to one viable strategy in particular: long-term rental properties.
The Portland real estate investing community should first look to either start building or contributing to an existing rental portfolio. For starters, years of cash flow generated from tenants may be able to justify today’s higher acquisition costs. With a median rent price of $1,560, it shouldn’t take too long to offset years of appreciation. Besides what already looks like attractive rental rates, the lack of available housing and the city’s low vacancy rate should increase competition, allowing Portland real estate investors to increase their margins even further. Combined with low mortgage rates (3.76% as of March), buying a rental property could result in a great investment.
Not unlike everywhere else, real estate in Portland has experienced a significant run-up; there aren’t enough homes to satiate demand, which has enabled owners to increase prices accordingly. As a result, real estate investors in Portland have turned to long-term rental properties. The new market created by the Coronavirus caters more to landlords than rehabbers. That is not to say there aren’t opportunities to flip real estate in Portland, but rather that opportunities are growing thinner as prices march higher.
In addition to an attractive rental market, investors in the Portland housing market will appreciate everything else the city has going for it:
Growing Market For Millennials
Lack Of Expansion Drives Housing Prices Up
Portland Housing Market Is Relatively Affordable
Growing Job Market
Growing Student Market For Rental Property
Growing Market For Millennials & Gen Xers
Increasing home values on a national level have driven millennials, America’s largest population of homebuyers, to seek more affordable living arraignments. As a result, the Portland housing market has seen an influx in millennial demand for the better part of a decade. In the years leading up to the pandemic (2012-2017), Portland’s millennial population increased by 22.8%, the highest increase in the country.
While slightly tempered than in years past, today’s positive net migration of millennials into Portland is still notable. In a recent study conducted by Knock, Portland has dropped to the sixteenth most desirable location for millennials. However, the most notable development is the increase in Gen Xers’ interest. As recently as 2021, Portland was the fourth most desirable place for the Gen X population.
Younger generations’ interest in the Portland housing market suggests the city has relatively affordable inventory. More importantly, investors who can secure assets in the price range of first-time homebuyers may find themselves with an abundance of demand.
Lack Of Expansion Drives Housing Prices Up
Despite years of historic appreciation, the median home value in the Portland housing market is expected to continue increasing. As discussed, demand has driven prices up in recent history, but the unique convergence of demand and a lack of inventory has contributed to greater increases than anticipated.
In particular, Portland’s lack of expansion over the last decade has pushed prices higher in an environment where demand is palpable. According to Gerard Mildner, associate professor of real estate finance in the School of Business at Portland State University, Portland produced 14,3000 housing units per year from 1990 to 2007.
“In 2011-20, we produced only 12,200 housing units per year. That’s a 15% decline, despite our much higher population base and substantially higher home prices and rents which should lead to more housing development,” says Mildner.
Portland Housing Market Is Relatively Affordable
The median home value in Portland is higher than the median home value in the United States, by about 73.2%. However, home prices are relative, and Portland’s home values appear attractive compared to many primary cities on the West Coast. Home values in Seattle, San Francisco, Los Angeles, and San Diego are all considerably more expensive than Portland. Any reasonable Portland housing market forecast will call for an influx in demand as work-from-home trends allow buyers to seek more affordable living arrangements. On the other hand, investors should expect demand to continue driving up prices for the foreseeable future.
Growing Job Market
Portland’s growing job market is yet another catalyst driving up home prices in the area. The local unemployment rate is lower than the national average and residents earn more than the national average. The unique combination of unemployment and average salary have attracted many people to Portland. All things considered, Portland has a healthier job market than most similarly sized cities and things may only get better. Already with global powerhouses like Nike and Intel Corporation, we are starting to see signs of a growing technology industry. If more tech companies start to call Portland home, we could see the already large interest from millennials and Gen Xers grow exponentially.
Portland Real Estate Market: Where To Invest
Not unlike every other city in the country, the Portland housing market may be broken down into several neighborhoods. Not surprisingly, some neighborhoods are better for investing than others. With that in mind, here’s a short list of some of the best neighborhoods to invest in:
Downtown Portland Housing Market
Goose Hollow Housing Market
University Park Housing Market
Downtown Portland is one of the city’s most desirable neighborhoods for both renters and buyers. Relatively compact and full of great places to eat and drink, the city’s walkability is a big selling point. It is worth noting, however, that those investing in the downtown area may want to place an emphasis on the rental market. Downtown rents are above the area average and demand will remain intact for quite some time.
Median Sales Price: $$417,500 (+24.5% year over year)
Number Of Homes Sold: 30 (+15.4% year over year)
Median Days On Market: 42 (-52 year over year)
Sale-To-List Price: 97.6% (+0.3% year over year)
Homes Sold Above List Price: 13.3% (+9.5% year over year)
Adjacent to Downtown Portland, Goose Hollow offers investors many of the same reasons for investing. The area has become synonymous with great places to eat and drink. Additionally, Goose Hollow has some of the area’s best public schools. There’s no doubt about it: Goose Hollow has plenty of demand. Investors who are able to acquire a home in this neighborhood shouldn’t have any problems flipping it or renting it out.
Median Sales Price: $325,000 (-3.8% year over year)
Number Of Homes Sold: 25 (+4.2% year over year)
Median Days On Market: 108 (+33 year over year)
Sale-To-List Price: 98.9% (+1.5% year over year)
Homes Sold Above List Price: 20.0% (+3.3% year over year)
Located in the northern part of the Portland housing market, University Park is a great place for long-term investors to look. If for nothing else, University Park is home to a large student population. While slightly different from traditional rental units, renting to students on a regular basis suggests plenty of demand. Turnover in this neighborhood might be higher than most others, but the demand could offset the hassle of finding new tenants regularly.
Median Sales Price: $530,000 (+1.9% year over year)
Number Of Homes Sold: 35 (+29.6% year over year)
Median Days On Market: 12 (+6 year over year)
Sale-To-List Price: 101.4% (-1.6% year over year)
Homes Sold Above List Price: 45.7% (-17.2% year over year)
The Portland housing market is keeping pace with its national counterparts. As a result, prices are increasing with demand, but inventory is being left behind; there simply aren’t enough homes to keep with today’s interested buyers. Consequently, Portland housing market trends are expected to continue for the foreseeable future. Over the course of 2022, look for inventory to grow tighter and prices to increase even further.
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