The last 18 months in Portland have been a mad dash. Prices for lots have nearly doubled, home prices are up 15-20% and inventory is under 4 months. Back at the beginning of 2012 average time on market in the most desirable areas was still almost 90 days. The fever pitch of the market was reached this past Summer 2013 with average days on market getting into the 2-3 week territory and many homes selling in the first week.
Here we are starting Fall 2013 and two big things have happened. One: Interest rates for loans are up from a bottom of 3.5% to 4.5%-4.7% – that equates to a loss of 10-12% of buying power just on interest rates alone. The timing of the rate jump coincides with event number two: The end of summer and the start of the seasonal slow down. On the street this shows up as a jump from 2-3 weeks on market to 50-60 days right now. Prices in the close in market are holding but the market as a whole saw prices drop in August 2013. If time on market increases we should also see inventory go up which is a good thing for buyers but for sellers it means pricing will likely slow down or back track as well.
If the FED hadn’t announced the continued purchase of loans rates would have gone up more but instead they went down. I was going to predict a 10% drop in prices market wide but I now feel we’re looking at a 5% drop in prices before Spring. Nationally the jobs report recently was not a good sign. Locally Portland is protected from big draw downs in home prices because of the urban growth boundary and in-migration. Portland is also still one of the most affordable cities on the west coast.