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Portland's Residential Real Estate Market Responds Surprisingly to COVID-19
By: MICK HARRIS
The COVID-19 health crisis has indelibly affected society, impacting our behaviors, habits, and priorities. Unlike previous recessions, our relationship to spending and saving may be markedly different in our current circumstance. One clear example in Portland is how the residential real estate market has responded to the coronavirus pandemic.
It feels intuitive that home prices would depreciate in times of economic contraction. Employees are laid off, household incomes shrink, and potential homebuyers have a smaller pot of money with which to purchase a home. Yet, according to the Regional Multiple Listing Service ("RMLS"), Portland has an undersupply of homes (2.4 months’ supply of homes on the market, to be specific) and this unbalanced market is a boon for sellers, as prices continue to rise. Oregon has one of the largest housing shortages in the United States and this low inventory is unlikely to be replenished soon.
According to the most recent 2020 RMLS Market Action Report, new listings decreased 30.3% from 4,902 homes in May 2019 to 3,419 homes in May of 2020. The average sale price has increased 2.8% from 452,700 to 465,600 while new listings have decreased 15.6% (15,409), pending sales have decreased 9.0% (11,846) and closed sales have decreased 7.4% (10,173).
Seth Prickett, a real estate agent with the Mahonia Group at MORE Realty, says “residential real estate is currently very competitive, especially for entry level buyers. There are two main factors driving the market right now, historically low interest rates and low inventory. This supply and demand formula is resulting in numerous scenarios where buyers are getting into bidding wars. This type of market can be daunting, but if you have an agent with the right experience, it could be a great time to sell or buy.”
Other market factors at play are further complicating the real estate market. Prior to COVID-19, interest in auxiliary dwelling units (“ADUs”) steadily increased from 2009 through 2016, as evidenced by a marked increase in permit applications from 25 applications in 2009 to a high of 545 in 2016. While the number of ADU permit applications declined from 2017-2019, it is likely that interest in homes with a second living space for relatives will increase as older family members are living longer and the cost of placing an elderly family member in a care facility for years can be astronomical and unmanageable. This is not to mention growing concerns over the large scale outbreaks of COVID-19 at nursing homes and other long-term care facilities, leading the state to require testing of all senior care residents and caregivers.
It is unclear what the future holds for the residential real estate market in Oregon and throughout the nation, but there is no doubt that low supply and high demand will continue to shape the accessibility of homeownership and should encourage the on-going conversation about how to increase the housing supply. These are significant considerations to navigate as a potential buyer or seller and if you have any questions regarding residential real estate, please reach out to your contact at Tonkon Torp.