What is the Portland Real Estate Market doing in February 2020? It’s mid-February and the New Hampshire Primary just concluded. Many people like to say that election years reduce home sales and other key economic growth. But actually, of the last 12 Presidential Election years, 9 of them saw more home sales nationally than the year prior. Our January numbers, and our feel for the market from watching activity are that it’s going to be a growth year.
Last year we saw the 2019 numbers go higher than 2018 at about mid-year. They lagged the first half of the year. This chart of Pending sales by month shows the cross over as sales were slower in the first half of 2019 than 2018, but better in the second half.
This was consistent with what we were hearing and seeing in the market. There was a mini-slow down in late 2018 that went through the spring of 2019. Buyers became more cautious and were less likely to make huge over asking price bids. There were still many homes with multiple offers, but the % of the upside was much lower. Median home prices in the Portland metro area only grew 2.5% last year and most of that happened in the middle half of the year, so about a quarter later than average. That’s key because normally our price increases happen right now – February through May.
A new chart that I haven’t really talked about before (shown below) is based on an algorithm developed by the National Association of Realtors. It looks at how affordable houses are in an area by comparing the Median Household Income and Median Home Price. Using the current Freddie Mac interest rates and a 30-year loan, this calculates what % of a median home a median family can afford. At the end of 2019, we were at 122% (good for Buyer affordability). So Median income is leading home prices in our area right now by 22%. Earlier, I mentioned the 3-4 quarter slow down we saw in late 2018. Notice the bar for June 2018 (end of 2nd Quarter) hit 98% for the Portland Metro Area. That’s what triggered a slow down in Real Estate. Suddenly our buyers were feeling like their income hadn’t kept up with the prices of homes. Price appreciation slowed as demand slowed, wages continued to rise quarter to quarter, and after a few quarters the trend reversed itself and we are back in healthy territory. The end of 2019 number puts us back in the same territory we were in in 2016 when Real Estate was booming in Portland and prices were going up due to high demand. We saw some of that again in January of this year, competing in several multi-offer situations with our buyers. We won 2 of 2 by the way. This is territory we have been through before.
So we are in a higher affordability situation right now, job growth continues with more spending by everyone from construction to high tech to retail. Consumer confidence is high and I believe homes listed in the next 2-3 months will sell well. That said, a home needs to be ready when it goes on the market, so let me know early if you are thinking about selling. It’s the work I do to help you in the 2 months before you go on the market that will make you the most money.
DreamStreet Team, Malcolm Ash Broker