2018 Portland Housing Market Forecast and Trends

2018 Market Forecast

Portland real estate market has been very hot in the last few years.  It is now slowing down.  2017 has been a mix bag in terms of hot vs cold in the Portland housing market.  Still, we have experienced between 5-7% increase in the last twelve months.  In 2018, the growth will slow down to 3-5%.  Most of the growth will happen in up-and-coming neighborhoods and other metro areas with a lower median home value.  In more expensive markets, growth will be slower.  It will be all about the affordability vs supply and demand.  Mortgage rates are also expected to go up to about 4.6% by the end of 2018.

 

2017 Portland Real Estate Market Summary

2017 has been still hot overall but with signs of slowing down in many areas.  2017 real estate trends have been quite interesting actually.  We still had about 5-7% increase in the home value appreciation according to RMLS data.  Comparing the values of May, the hottest month of the year, the appreciation from May 2016 to May has been 5.5% from $412,000 to $436,250.  The number varies from neighborhood to neighborhood and property types but that’s the overall sold price data for all Portland.  The 12 month median sold value appreciation is as follows for key months:  4.7% in April, 6.8% in June, 3.8% in July, and 4.3% in August.  Of course these values do not include home value appreciation for homes not sold through the MLS and according to S&P Corelogic Case-Shiller as of November 28, the appreciation for the last 12 months for Portland Oregon real estate is 7.31%.  Zillow put out the appreciation value for 2017 home appreciation value of 6.7% from May to May.  From December to December, the 12-month appreciation drops to 0.8%.

Depending on the affordability of a neighborhood, it could still be hot in 2018.  Below is the data from Zillow for each Portland neighborhood and although Zillow figures can vary widely depending on the month data is collected, it may still paint the picture of what to expect next year.  Most of the values are conservative figures collected in December 2017 so use some discretion interpreting the data.  Using May-May values, the last 12 month appreciation % below could be double.

 

Slow Appreciating Neighborhoods in 2018

Neighborhood Last 12 Months (%) 1 Year Forecast (%) Median Home Value
Laurelhurst  3  2.4   $756,400
Eastmoreland  1.6  2  $756,400
 Northwest Heights  0.4  1.6  $783,500
Irvington  0  1.1  $780,800
 Richmond  -0.2  1.1  $520,800
 Rose City Park  -1.9  0.1  $524,000
 Hillsdale  0.8  1.5  $564,200
 Sellwood-Moreland -1  1  $500,200
 Sunnyside  -0.7  0.6  $529,900

 

Still Hot Neighborhoods in 2018

Neighborhood Last 12 Months 1 Year Forecast Median Home Value
Lents  5.6 3.3  $280,000
St. Johns 4.6 3 $336,200
 Powellhurst-Gilbert  6.9 3.6  $278,400
 Brentwood-Darlington  5.8 3.4  $309,400
 Pleasant Valley 3.5 3.2  $385,600
 Hazelwood 6.1 3.4  $297,900
 Montavilla  3  2.7  $338,900

 

2018 Portland Metro Housing Forecast

City Last 12 Months 1 Year Forecast Median Home Value
Beaverton 6.7 3.1 $364,600
Hillsboro 7.7 3.3 $348,500
Gresham 5.5 3.1 $308,200
Oregon City 6.2 2.9 $373,700
Milwaukie 5.7 3.3 $333,900
Lake Oswego 7.2 2.9 $604,800
West Linn 2.5 2.9 $494,700
Tigard 4.7 3.2 $402,200
Wilsonville 4.9 2.7 $442,000

 

2018 Overall Portland Housing Market Forecast

Let’s first talk about what’s going on nationally.  Zillow chief economist Svenja Gudell predicted housing value will appreciate 4.1% in 2018, which is a slower growth from her stated 6.9% in 2017 appreciation.  Realtor.com predicts the growth to be 3.2% according to their 2018 forecastFreddie Mac forecasts 4.9% growth for 2018.  Realtor.com also predicts that most of the growth will occur in southern and southwestern states in 2018 ranging from 6-7%.

So what does that mean for Portland, OR?  Portland has been one of the top markets in the last few years to appreciate.  However, in 2018, Portland will lose its steam.  It already lost steam as a leading market in 2017.  Zillow predicted in the summer of this year 4.5% growth for 2018.  Realtor.com predicts that the Portland metro will only appreciate 4.98% while the Seattle metro will appreciate 6.21% in 2018.

 

Other Housing Market Forecast for Portland in 2018

Supply to Remain Low

Portland area has a major low supply issue and it’s not improving as quickly.  New homes are being built in the suburbs like Hillsboro, and Damascus but in established areas, development only seems to focus on multi-family residence buildings.  The cost of new building is also not affordable unless you are willing to commute a long distance.  In Portland, most of new construction condos are luxury and are beyond the reach of families with median income level.  Existing homes are more sought after due to more affordable prices and space but the inventory of these homes are very low.  That’s why we have still had lots of multiple offer situations in 2017 though not as bad as 2016.  Realtor.com 2018 forecast above suggests home sales in Portland will decrease in 2018 by 3.48% whereas Seattle sales will increase by 2.34%.  This is probably a combination of factors including low supply and the gap between the median income level and the housing appreciation level.

 

Oregon Economic Growth to Slow in 2018

According to Oregonian, we are reaching the state of “full employment” and although our unemployment rate is record low as of May 2017, the growth has slowed considerably and we are about to enter into the period of a slow growth.  Although Portland area is a highly desirable place to live, without more jobs being created, the demand for housing will decrease.  Portland also needs more high income jobs created as a lot of the growth in the last few years has been in the below-median level.  With a slow economy, the future of Portland housing market will also slow down.  2018 will probably be the turning point of the housing market correction in the form of little growth while supply and income to hopefully catch up.

 

Millennials are the New Buyers

In 2017, 40% of all mortgage origination was by millenials.  In 2018, it will increase to 43%.  Millennials are getting older and the if you were born in 1982, you are 35 as of 2017.  Lots of millennials have started a family and have full-time jobs.  Like anywhere in the US, Portland housing market will show a strong sign of more millenials entering the real estate dream in upcoming years.  That means if you are an older seller of a home with a size fit for a young family, updating it to appeal to young buyers will increase your chance dramatically to sell your home in the more slow market dominated by millennials.

 

Lents is the New Hot Spot

Lents neighborhood is completely transforming in 2018 with lots of ongoing constructions scheduled to complete by the spring of 2018.  What used to be a not so desirable area has now transformed into a high rise urban center.  Lots of modern apartment buildings and commercial buildings are being constructed around Foster and 92nd.  There will be a ton of new retail shops and restaurants including Flipside Bar and Carts with an eight-cart food cart pod, a rooftop deck and a 2,500-square-foot indoor bar and seating area with cocktails and around 15 craft beer taps.  Lents Town Center will be the new cool place to be for Portland residents who happen to live in the outer skirts of SE Portland where homes are more affordable.

 

Mortgage Rates will Go Up

We have enjoyed some of the lowest mortgage rates in the last several decades.  As of today, the rates are still low.  30-year fixed mortgage rate is still around 3.7% with excellent credit.  According to Mortgage Banker Association, mortgage rates are expected to go up to 4.6 next year and to above 5% in 2019 and 2020.

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Peter Park

I’m a realtor with attorney experience representing buyers and sellers throughout the Portland metro area.

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