Opinion: Over the next five years home prices in the Portland area will continue to rise to new heights and competition to purchase homes will be tougher than ever IF interest rates remain low and negative publicity is addressed accordingly. The suburbs are particularly well positioned for future growth in a post-covid era.
Historically Portland has seen the median home price rise around 6.9% on average, each year since 2013. (See Below -RMLS Market Action Report Jan. 2021)
According to Black Knight, the national average appreciation rate for the past 25 years has been about 3.9%. So why is Portland performing almost 3% better than the national average?
The Covid Shift
Portland leaders have implemented some of the strictest rules and regulations for behaving in public. This unintentionally created an increase in demand for single-family homes in a market that already had a low supply. Homebuyers longed for those amenities they had previously taken for granted, such as office spaces, outdoor areas, gyms, and so much more. Apartment dwellers previously had no need for private amenities and shared many of these spaces for cost efficiency, that's not exactly ideal when a contagious virus is running rampant. As a result, homes providing these amenities have inherently gained value. Perhaps, this will change the way apartments and homes of the future are built. The "Covid Shift" as I call it, will linger in the back of home buyer and seller minds for many years to come, much like 2008.
Portland's inbound migration rate is nearly 4 times faster than the national rate as of 2020. See this article by the Oregonian for more information. This means people are choosing to move to Portland over other cities. More people means more housing. But what if there is already a low supply of housing? Prices will naturally increase according to supply and demand. Inbound migration suggests that people outside of Portland see opportunities here that are superior to other places in the country. Positive sentiment on the outlook of a city is important for its future growth.
Make no mistake, I am not saying that Portland's cost of living is affordable for everybody. Rather, in comparison to other west coast cities like Seattle and San Francisco; Portland is still a bargain. Let's look at the median home sales prices as of March 2021 according to data from Redfin Insights.
Los Angeles: $845,000
San Francisco: $1,389,000
Quality of Life
Quality of life is very important factor that contributes to Portland's inbound migration. The commute is easy on foot, bike, public transit, or even by car. In Portland, it's entirely plausible that you might be a short 10 minute bike ride from work. Did you know the Tilikum bridge is dedicated entirely for pedestrians? Not to mention the city is surrounded by natural amenities like the Columbia Gorge, Mount Hood, National Forests, rivers, and parks. Perfect for hiking, fishing, biking, and camping. Even in the winter there are plenty of fun activities, whether it's snowboarding at Timberline Lodge or bouldering indoors at the Circuit Gym. And don't forget that Portland's food and beer scene is top notch. You could try a different restaurant or brewery everyday and still have a bucket list that looks like a CVS receipt (very long).
Some people complain about homelessness, construction, or traffic, however, most cities face similar challenges. One of the largest and most unique challenges Portland will have to overcome in the next few years is negative publicity. If not dealt with accordingly, this could seriously affect inbound migration, which is a large part of Portland's economy. Portland needs people and businesses to move here to continue growing. If they are scared away before even considering it, this could cause a real problem. In recent times, Portland's name has been slandered, some even going as far as to label it a "warzone". These are headlines and hyperbole designed to generate clicks. Portland is a city full of funky neighborhoods, outdoor enthusiasts, delicious food, excellent public transportation, beautiful parks, and of course WEIRDNESS. Portland will continue to grow and home prices will continue to rise if it can successfully address these challenges.
Question for Readers
Do you think Portland home prices will continue to rise and if so why or why not?
Still have questions?
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Licensed Oregon Real Estate Broker
Disclaimer: This is not financial advice.