This week I had the opportunity to listen to one of our favorite local economists of choice, when it comes to the Portland real estate industry. Mindy Sullivan has been working in and following Portland real estate trends for 35 years, and she tells an insighful story for what's in store for 2011. We took a look back at the history of Portland real estate, and who the players are that drive the market, starting back in 1990 when the country came out of the last recession.
For a period of time in the early 90's our market was driven by Californians investing in the Portland area, and interest rates were at nearly 10%. In 1993 interest rates dropped to record lows, and the baby boomers began refinancing their homes, which is when Portland saw an increase of first time home buyers in the market. In 1994 the growth in Portland reached 2.4%, which later lead these buyers to drive the market in 1998 after becoming established in the area. Between 2001-2003, Oregon had a small recession, yet the housing market continued to soar with increased building and appreciation of homes.
In 2007, the Portland market dropped in both home sales and prices, and we continue to do so in most areas of Portland. The good news is that if you've been looking for the bottom of the market, we seemed to have approached it, and will likely be bumping along it for much of the next year. Despite the sharp drop in sales and prices over the passed 3-4 years, our home values are on Parr with where the national rate of appreciation should be.
So who's driving the real estate market today? There are certainly many different players in today's real estate market. We have the banks in the game, distressed sellers trying to short sale their home, along with the traditional seller who are forced to compete in an unjust marketplace. Until we are able to get through the current inventory of homes, as well as all the shadow inventory that hasn't even hit the market yet, we will not see significant appreciation. Some even predict that it could take another 4-5 years before we return back to a more balanced market.
This is definitley a market of opportunity for some people, and they are smart to take advantage of the affordable prices, and historically low interest rates available today. We are still seeing a large number of first time home buyers who are positioned to keep their homes for 10 or more years, gaining equity and all of the benefits of home ownership.
Investors are another group of buyers who are driving our market today. The city of Portland anticipates that within two years, we will have a shortage of rentals available. According to Realty Trac almost 1000 Multnomah County homes are in foreclosure status between $100,000-$200,000. Investors can pick up 1-2 rental homes that will cash flow, hold on to them as rentals, and sell them when the market returns after 4-6 years.
The future real estate market in Portland includes many factors, including employment, and personal income growth, both expected to improve slightly in 2011. We also need to gain the consumer confidence back in the housing market. Home ownership really does matter, and is a major stepping stone for building personal wealth. It is still the American Dream to own a home, and there has never been a better time to buy than right now!!!
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