While life is full of uncertainties, one factor remains the same: housing prices are on the rise. This non-stop increase has generated a windfall for homeowners and significant anxiety for prospective buyers, as home prices skyrocket, while wages fail to keep up. On the West Coast, the continued escalation in housing prices, coupled with a sharp increase in the cost of living, has pushed cash-strapped city dwellers into a state of perpetual rental.
Citing a recent report by Attom Data Solutions LLC that analyzed data in 1,154 counties nationwide, the Portland Business Journal reports that “median home prices have increased more than average rents and average wages in 88% of the counties analyzed.” As a result, “renting is more affordable for average wage earners than buying a home in the most populated areas of the country.” According to the report, it was more affordable to rent than to buy in “21 of the nation’s 25 most populated counties and in 35 of 42 counties analyzed with populations of 1 million or more.” Oregon is no exception. Renting is more affordable than owning in many Oregon counties, including Multnomah County, Washington County, and Clackamas County.
This should not come as a surprise, given the data on home prices in the Portland metropolitan area. As reported by the Portland Business Journal, in 2021, “the median home price in the Portland metro area rose an astonishing 15.7% from $440,000 to $509,000, more than doubling the pace from 2020 when it rose 7.3%.” In 2021, the median sale price in Multnomah County was $522,577. In the suburbs surrounding Portland, price tags were even higher. In Washington County, the median sale price was $540,812 and in Clackamas County, a whopping $583,903.
Seth Prickett of Mahonia Realty explains that three main factors are driving these price increases: “Low supply, high demand, and remarkably low interest rates. We are in a sellers’ market that holds less than one month's worth of inventory.” From the perspective of a market analyst, six months of available inventory are required for a market to be considered even for buyers and sellers.” According to Mr. Prickett, “the Portland metropolitan area needs either an increase of listings by around 600% or a drastic decrease in the number of buyers looking to purchase a home to achieve a balanced market.”
Interest rates have already increased this year and additional rate hikes are on the horizon. However, the market will remain squarely in favor of sellers until Portland can alleviate its demand problem. The City of Portland has taken some steps to address this problem. Notably, the City adopted the Residential Infill Project in 2020 to allow for increased density in single-family neighborhoods. This policy allows for more duplexes, triplexes, and fourplexes to be built on single-family lots, creating increased supply opportunities. But, additional creative solutions are desperately needed, as there is a long road ahead before the market shifts.
