By Andy Meeks, August 25, 2018
By Andy Meeks, August 25, 2018
One of my working principles as a real estate broker (and generally in life) is to remain a beacon of optimism. Or, more specifically, pragmatic optimism. I want to empower my clients, as well as to instill hope and clarity, whether in the middle of selling a home, experiencing closing day jitters, or figuring out the best way to begin the home search. Lately, I’ve heard potential first-time homebuyers feeling a bit hopeless about their prospects of being able to ever buy a home in Portland, and that bums me out – especially when I know it’s within their abilities to do so. My pragmatic optimism is based in objective information, realistic strategies, and common-sense solutions.
I want to apply some of that optimism here to help first-time homebuyers out there to be more informed, confident, and hopeful about their potential next steps.
As a way of exhibiting this pragmatic optimism, I ran a nine-part series on Facebook from April to July that I called #GettingStarted. In each of those posts, I handpicked new Portland eastside neighborhood home listings that had quality finishes, with room to grow, and were move-in ready. All but one of these homes were west of 90th Avenue, and all of these homes were at or close to the $300,000 price point. I think of these as high-value starter homes. With this series, I wanted to show that there were indeed (and still are) homes at and around the $300,000 price point in Portland that are attractive, sound investments that can make financial sense for first-time homebuyers.
I tracked each of the nine properties* from listing date to closing to provide some rough data on how fast and at what price each home sold. Now that the last of these properties closed earlier this week, I’m able to report back on what this small sample size tells us about these high-value starter homes:
Average Listing Price: $307,000
Average Size: 1,216 sf
Average Days On Market: 7.3
Average Sales Price: $323,988 (~5.5% over average list price)
LOOK PAST THE HEADLINES
It’s true that the past several years haven’t been favorable for first-time homebuyers, with historically low supply and stiff competition, all-cash offers, and the steady increase in home prices across the Portland metro region. And the drumbeat of dour news about the increasing unaffordability of our local real estate market doesn’t help the mental outlook.
However, this news doesn’t always apply to first-time homebuyers who might be looking to trade their (already relatively expensive) monthly rents in order to pay themselves, start building equity and wealth, and establishing deeper roots in the place they love, work, and call home.
The recent Oregonian article, “Portland metro home prices cross into ‘unaffordable’ territory” is a good example of this type of news. While the article itself wasn’t misleading, the article focused on the relative unaffordability of housing for households at median wages ($81,400) buying a house at the median sales price as of this June ($417,900).
As my #GettingStarted series shows, first-time homebuyers can find a great home for much less than that median sales price, if they’re willing to be flexible and creative, and don’t have to live in the heart of the inner eastside. (Caveats always apply!)
FACTS, FIGURES AND FINANCES
While competition for these high-value starter homes can be higher than average, gone are the days of a dozen offers tens of thousands of dollars over asking prices. Buyers are starting to establish a bit more influence as the market cools. And mortgage rates have held steady this summer and are still historically low, currently less than 5%.
Some more objectively-positive news: housing inventory is starting to increase, marked by a 14% jump from June to July, hitting its highest point in more than two years. This increase in supply helps alleviate increasing price pressure – in fact, Portland’s median sales price dropped 1.7% in July to $401,600. This is positive news for all buyers.
In addition, there are numerous loan programs where you can qualify for a loan with just a 3% downpayment. For a $300,000 home, that’s $9,000. (And some programs even work with just 1% down.) Either way, for many renters, this is achievable and can be done in a way that leaves aside some extra cash for the inevitable upgrades and repairs. I have a network of trusted, local lenders I’m happy to refer who can walk through all of the options, at no cost and with no commitments.
Finally, Trulia last month released its annual Rent vs. Buy study for the country’s largest 100 markets. In 98 of these markets, including Portland, it’s still less expensive to buy a home when compared to renting. According to this study, it’s 13.8% cheaper in Portland to buy than it is to rent.** With the median rent in Portland around $1,895, you can do the math with an online mortgage calculator to figure out what your monthly mortgage payments would be – don’t forget to include property taxes & insurance, as well as PMI (private mortgage insurance) if your downpayment is less than 20% – and how they compare to your current rent payments.
PLAN YOUR NEXT STEPS & TAKE YOUR SHOT
As a potential first-time homebuyer, it’s one of the best times in the past few years to plan your next steps, put your best foot forward, and take your shot. If you’re thinking about starting your journey towards homeownership, please give me a call. I’m here to guide and support every step of the way, to connect you with professional resources, and to develop and execute winning strategies that make sense for you – all with pragmatic optimism and positivity.
*Here are the nine homes I identified and tracked as part of the #GettingStarted series. Most of these homes were 2 bedroom, 1 bath, but a few had 3 beds and a few had 2 baths. These locations are plotted on the map image above.
4395 NE 90th Avenue
8442 SE 62nd Avenue
6548 SE 90th Avenue
6210 SE Hazel Avenue
6315 SE Clatsop Street
4718 NE 90th Avenue
5816 SE 84th Avenue
5616 NE 50th Avenue
12616 SE Sherman Street
**Trulia calculates the cost of renting versus buying by assuming households stay in their homes for seven years, can afford to put 20% down and take on a 30-year fixed rate mortgage when buying their homes. View their complete methodology HERE.
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