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Portland Real Estate in the Crystal Ball
A November 2005 Business 2.0 magazine article, The $25 Trillion Land Grab, reports that over the next 25 years in the U.S., planners predict we will build out 200 billion square feet of housing to accommodate 70 million more people at the cost of $25 trillion.
Virginia Tech urban planning professor Robert Lang believes that the bulk of investment will be in 10 major metropolitan areas he calls ‘megapolitans’. These supercities will be created as mergers of existing metro/suburban areas with common economic characteristics and development potential. Examples include Norcal (Sacramento/San Francisco), Valley of the Sun (Phoenix/Tucson), and I-85 Corridor (Raleigh-Durham/Atlanta).
Lang also highlights Cascadia, a megaregion encompassing the corridor of Eugene, Portland, and Seattle. To quote:
“Vast quantities of cheap, prime greenfield surrounding Seattle, Portland, and Eugene give the Northwest megapolitan explosive growth potential. By 2030 the three metro regions will be intertwined.”
Researcher’s best residential real estate bet? $200,000 homes in small towns 30 minutes outside Portland, beyond the urban-growth boundary.
A related article, Unarrested Development, points to Beaverton, with its Nike and Intel job bases, as one of the country’s most likely cities to experience hypergrowth.
Neighborhoods by Martha
Five months in prison hasn’t done much to dent the Martha Stewart brand. In fact, in addition to new publishing ventures, music and TV deals, and domestic products, MSNBC is reporting that Martha is lending her name and design touch to a 650-home subdivision in North Carolina.
While I can’t imagine that concept flying here in Portland, 62% percent of MSNBC’s polled readers thought Martha’s designs were divine, and would be something they’d buy.
And, it leads me to think….what’s next? Townhomes by Trump? Oprah’s Oswego Estates? Pearl Lofts by Paris Hilton?
Portland Market Trends – 2006 Forecast
I recently attended a 2006 Portland real estate forecast keynote delivered by Jerry Johnson, a principal at Johnson Gardner, LLC (a Portland-based real estate and land development consultancy). He provided some interesting insights looking forward, including a fairly bullish outlook on PDX’s residential real estate future.
Portland’s Economy Growing….Slowly
Johnson commented that Portland’s general business cycle runs a little behind the national average. In the areas of unemployment and wage growth, Portland is improving, but very modestly. Portland’s unemployment is still 1.5% higher than the national average. New jobs have come in the information services, high tech, and education/health services in particular, but again have grown only 2% from May 2004 to May 2005. And due to the higher unemployment numbers, 2005 is the first year that wages have shown positive growth since 2001. Metro area population growth in 2005 will be around 1.6%.
Affordability and Home Ownership
As seen throughout the local press, Portland continues to be an attractive place for out-of-state real estate dollars due to its affordability index. With a median price of $233,800, Portland ranks as one of the more affordable communities on the West Coast (the national average is $212,000 and $302,000 along the West Coast). Right now, nearly 67% of Portland’s residents own homes, the highest range since 1991. However, as interest rates rise, Johnson expects home ownership to settle in around our normal average of 65%.
Note to investors: A rise in interest rates could offset much of the low-end home purchases, thereby increasing the popularity of renting and providing the first real rent stability seen in the last few years.
Potential Threats
Despite the modest growth of Portland jobs and wages, real estate activity has been very strong. Johnson attributes this to the low interest rates have that have offset this gap in buying power. Between 2000 and 2005, although the median household income rose only 3%, a 30% decrease in interest rates provided additional mortgage dollars in everyone’s budget. And there lies perhaps the top threat to PDX’s real estate market. Johnson’s example of rates rising to 7.5% would increase the mortgage payment by 26% for a median home in Portland. Johnson also called out exuberant speculative appreciation expectations (remember the 2000 Stock Market?), as well as inflation concerns and the rising costs of oil as other potential drags on the economy.
And the forecast….drumroll please
Johnson was optimistic about Portland’s residential real estate market, including a potential revival for rental property. The economy is growing, jobs and wages are improving, the metro area is expanding (albeit modestly), and demand still outstrips supply. Good news for most of us in 2006.
Source: Jerry Johnson, Principal, Johnson Gardner, LLC.
September 2005 Market Activity
Portland’s robust real estate market continues to blaze along.
The average home price in PDX over that last 12 months was $273,200–a 14.1% increase over the average for the twelve months prior.
The good news for buyers was that September 2005 showed the largest monthly increase in new listing for the year, up 21% over September 2004. However, home sales are nearly keeping pace with this new inventory, leaving less than 2 months’ supply available to eager homeseekers.
In other words, prices are still going up and the stuff is still flying off the shelf.
Source: RMLS, September 2005
12-Month Portland Appreciation – September 2005 vs. September 2004
Appreciation statistics reported by the Portland multiple listing service (RMLS) continue to show impressive gains through September 2005.
The average sale price in the Portland area was up 14.1% over the previous average from the 12 months prior.
Here are the 12-month averages for Portland metro communities:
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19.0% – Tigard/Tualatin/Wilsonville
17.9% – Oregon City/Canby
16.2% – North Portland
16.1% – Milwaukie/Clackamas
15.1% – West Portland
15.0% – Northeast Portland
14.9% – Hillsboro/Forest Grove
14.4% – Lake Oswego/West Linn
14.2% – Southeast Portland
13.6% – Beaverton/Aloha
13.2% – Gresham/Troutdale
11.6% – NW Washington County
Note: Appreciation percentages are based on a comparison of average price from the last 12 months (10/01/2004 – 09/30/2005) with 12 months before (10/01/2003 – 09/31/2004).
Source: RMLS, September 2005.
re:PDX Debuts!
Welcome to re:PDX, a weblog covering the Portland, Oregon metro real estate market.
In an active market like PDX, knowledge and preparation are key to successful, low-stress transactions. I hope re:PDX will serve as a resource for anyone interested in testing the waters, relocating to Portland, or for real estate ‘junkies’ in general.
I expect to cover many areas affecting the buying and selling of real estate, including:
- Market Conditions and Trends
- Real Estate News and Coverage (local and national)
- Buyer’s Resources (first-timers and upgrader/downscalers alike)
- Best Practices in Selling Real Estate
- PDX Metro Community Spotlights
- Real Estate as an Investment
- PDX Metro Community Spotlights
- Mortgages and Lending
- Portland Lifestyle and Livability
- …and the occasional diversion or two
To expand my coverage, I plan to invite experts in areas outside of my specialization, like lending, inspections and more.
DISCLOSURE: I am a licensed real estate broker in Oregon and a member of the local and national REALTOR associations.
So there it is. Call it a blog. Call it a journal. Doesn’t matter much to me. Just bookmark re:PDX and check back again soon.
