economic forecast Archives - Living Room Realty

2023 MARKET UPDATE VIDEO

Our team lead and data aficionado Karim Alaeddine has this insight to share about the Portland market:

Hey I’m Karim Alaeddine, Principal Broker at Living Room Realty… here to tell you what you need to know about the market for mid May/early June 2023.

Let’s take a peek under the hood of the Portland market, look for trends and try our hat in prophecy… forecasting.

Pricing is going up. It’s been headed north since the very first day of the year.

Fun fact – the rolling average for median home sales price in Portland is only $50 lower than the absolute high water mark in Spring 2021, when inventory was non-existent and buyer competition was fierce, like… super competitive. We are at that absolute sales price average again today.

Days on market – a measure of how quickly the current pool of buyers is burning through the current pool of listed homes. This metric has been dropping for 2 or 3 months… as it nearly always does in the spring. To give some perspective, this data (measuring the rate of homes being sold) was last at this level in the spring of 2020. So for most of 2020, all of 2021 & all of 2022, the average days a home spent on market was lower than this week. At its absolute low point in June of 2022, the # of days on market were half of today.

If you’re visual like me, you might imagine a roller coaster going up and down each year (as inventory increases, then gets bought up.) 2023 is a softer, easier ride. Not so dramatic and the downhill fun part (when a lot of homes are getting sold) is less steep… more of a family-friendly ride this year. It’s steady… or it’s a slog, depending on who we are talking with. Not overly volatile though.

That means homes are taking longer to sell… and we’re creeping into the spring/summer season more slowly.

Let’s look at an interesting data point about pricing, that sort of answers the questions;

“Should I wait?”

“Will I get buyers?”

“Are prices going to go up?”

“Are prices going to go down?”

A statistic that sheds light on these kinds of questions… the questions we ask when we have begun to think about a move, and are looking into the market crystal ball… is the rate of price reductions in listed homes.

“How many listings took a price reduction?” To frame the numbers for us, between MARCH of 2020 and AUGUST of 2022, at any given time 20% to 40% of the homes on the market had price reductions, and this was in the MIDDLE of the hot AF market. In SEPTEMBER 2022 that number was headed upward (as a direct result of rising interest rates and lower buyer activity.) It went as high as 55%. Yeah – more than 1/2 of homes on the market had taken price reductions.

However, in May 2023 we were in the 33% range (middle range of even the smokin’ market) and that stat was trending downhill. We’ll see what Summer brings. Low inventory (the major issue in our market) should keep reductions down – prices up. But demand remaining low will stall things. We’ll see.

Homes are selling, mostly without reductions. Price drops are – of course – used to stimulate buyer activity, but less downward pricing pressure is required to move property when buyers are interested in making a move, in earnest. Lifestyle drives home purchases. Purchases drive market trends. It takes a lot of pressure to turn off the natural incentives of people to move, purchase, sell as these things are life-and-times driven.

Lastly, competition is increasing amongst buyers. (We could do a whole hour on the ins and outs of niche sectors of the market that outpace the averages for metro area – within which competition is still super fierce.) Interest rates were looking to be leveled – with small dips and rises each week of course, but relatively stable. Pricing is actually quite strong meaning the sentiment amongst the market actors (mostly buyers) is that Portland is a good buy for long term housing & investment. Rates may slow things further but the inventory and demand balance does seem to have some natural strength to it… steady or sloggy though this year.

So… with sales strengthening and inventory as low as it is, current supply and demand levels show no sign of prices changing course too dramatically.

In closing…

Spring is here.

Homes are selling.

Not as crazy as last year.

… Still Portland though.

Realtors are advocates who help buyers & sellers ask the very best questions, in order to guide clients through the market and into secure, positive transactions that align with their goals and dreams. Hashtag honored.

We’d love to help you find your next home.

That’s a question that a lot of people are trying to answer, as we face unprecedented price increases due to historically low inventory, not just in Portland, but in markets across the United States. Not surprisingly, COVID’s effects are widespread and also somewhat subtle. This was the subject of a front page article in the New York Times late last week titled “Where Have All The Houses Gone”

Below is a chart with five representative housing markets showing inventory at or (far) below 50% of levels from one year ago. Last month, Portland was at 55% below the inventory levels from January 2020. Of course, this has huge impacts for both buyers and sellers. And while sellers are the beneficiaries of high prices, they also have to then find themselves replacement housing and come up against the same pressures that buyers are facing. It’s a tough cycle with no clear off-ramp in sight for the near future.

Source: New York Times (https://www.nytimes.com/2021/02/26/upshot/where-have-all-the-houses-gone.html)

This pull quote from the NYT article encapsulates the complexity of factors involved: “We’re all looking for a unified field theory for what’s going on,” said Mark Zandi, the chief economist at Moody’s Analytics. “We have all these disparate pieces of information. Everyone’s got their own telescope looking up into the sky, measuring different things. It’s hard to put it all together.”

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Here in Oregon, one of those people with their telescope to the sky is Josh Lehner from the Oregon Office of Economic Analysis

Josh writes frequently about all aspects of Oregon’s economic outlook, always supported by great research and with an accessible narrative. I recently sat through one of his webinars about the housing market and I wanted to share some of his insights below. You can also subscribe to Josh’s free newsletter HERE

Josh is bullish on the housing market sustaining further growth, supported by a forecast of steady, low 30 year mortgage rates to continue to bolster buying power, but also shows some factors that will continue to stress inventory, such as a flat forecast for housing starts and the Millennial generation fully aging into the prime buying years of the 30s and 40s. One interesting note is the slide below showing how the number of people working from home will continue to steadily increase in the coming years. In short, we won’t be going back to our old ‘normal’ in terms of work arrangements and how we view our homes.

Speaking of old normals, it remains to be seen whether inventory will start its traditional annual increase as March begins…we can only hope it does.