Portland, Oregon real estate market forecast for 2016
Housing market in Portland, Oregon has been really hot in the last three years and the market is still expected to be strong and steady in 2016 despite the national forecast that the housing market will slow down. Real estate market has recovered nationally since 2012 from the great recession and in last three years, the market has been fueled by home buyers and investors. The growth rate has been remarkable in the last three years. In Portland, the biggest growth occurred in 2015. Now we are way past the highest peak level before the market crash in 2008. Portland has been attracting foreign and domestic investors with all cash offers. Additionally, Portland has a huge demand for housing as a significant millennial population from other parts of the U.S. has been migrating to this desirable and hip city. Overall local economy is also strong with a healthy job market in Portland as observed as of the end of 2015. The real estate market is still very hot for all the reasons below and the momentum of 2015 will not just stop.
2016 Portland housing market forecast takes into consideration of following factors: 1) National economic and housing market trends; 2) Local economy and job market; 3) Supply and demand of housing in Portland; and 4) Interest rate hike in 2016.
National Economic & Housing Market trends
National economic forecast for 2016 is not as great as 2015 or previous three years. Stock market has been hit badly in the beginning due to Chinese market and all-time low oil prices. Chinese stock market has been hit 20% low from its recent peak. US Economy is affected by emerging markets and our dependency on Chinese market is non-negligible. Overall US job market is strong so far. People are earning more money than in previous years despite the argument that the low unemployment rate itself should not be the only data to consider due to an influx of low-end jobs. Consumers have paid off their debts and underwater home buyers from 2008 recession and buying homes again. Lending standards are still tight, meaning at least it is not causing what happened back in 2006. The stock market crash is arguably only a market correction, not a road to recession.
Major real estate companies like Zillow and Trulia are predicting a slower growth in 2016 in real estate market. Average growth predicted for 2016 is around 5%, which is a significantly slower growth than previous years. This is a national housing market growth prediction.
Local Economy and Job Market
Portland economy has been at full swing in 2015 and 2016 does not seem to raise any red flags. Portland unemployment rate is at 4.4% in 2015, down from 11.5% in 2009. Oregon residents are working and earning money. There has been lots of investments and job creations in Portland, OR and these activities will continue in 2016.
Supply and Demand of Housing in Portland
Simply put, there is no supply and a huge amount of demand for housing in Portland. There are not many inventories and a huge number of buyers. The housing market has been real hot and it is a seller’s market. The rental market is also important to consider. Apartment rents are going up the roof because there is a huge demand but lack of supply in rental market as well. All the new construction apartments are luxury apartments, ones that most people cannot afford. People are paying rents that are 20% higher than 2-3 years ago. Moreover, Portland also has been a mecca for young millennials from all over the country as it is a trendy, hip and desirable place to live (Thanks to Portlandia?). This means increased demand for rental. Increased demand for rental drives up the prices and that drives up demand for housing and that of course drives up prices for housing. This vicious circle will not just stop in 2016. It will continue but for something cataclysmic.
Interest Rate Hike in 2016
Interest rate hike recently occurred in the fourth quarter of 2015. Federal Reserve predicted that the market is performing well enough it warrants an interest hike. Stock market has partly responded to the interest hike, but the recent trending bear market is due to other factors like China. Mortgage rate while mostly unaffected, is starting to hike an upward adjustment slowly. A lot of folks are refinancing before the train takes off in 2016. It will likely not take off in 2016. Federal Reserve is very careful in not implementing changes that will cause businesses and home buyers to panic. Hypothetically, if the mortgage rate went up dramatically, it will price out many many home buyers, while not affecting cash buyers. That will decrease demand and lower housing prices in theory. But the fear is the strong rental demand in Portland will not affect housing prices while the interest rate remains high. No one really knows how that will turn out and the Federal government is certain aware of any negative implications. The public policy the Federal government supports is for greater home ownership by working American families and will not raise rates so quickly if it will jeopardize their policy.