Looking back at 2018 and what to expect in 2019.
2018 was a transition year for real estate. We started off in the same Seller’s market we had been experiencing since the beginning of 2016. Low inventory, low interest rates, and high demand. In late June we started noticing a slow down in the number of homes going pending. This was not unusual for this time of year. We typically see a pause between school getting out and the Fourth of July. But July continued to lag behind past years, and by September, all Realtors were starting to take notice. Homes started to stay on the market a few weeks rather than a few days. This shift caused some havoc with Sellers who were expecting multiple offers and a quick sale. Listing Agents were slow to pick up on the shift. They made it worse by pricing homes too high (which worked in the recent past). These overpriced homes began to sit on the market and eventually had to reduce their asking price. At one point in November, 75% of all homes listed had made a price reduction.
This adjustment or correction didn’t result in homes losing value as you might think. What did happen was the appreciation rate slowed down but did not stop. Interest rates rose in the Fall while the stock market was soaring adding to the slow down. In December the stock market took a dive and interest rates improved a bit and started 2019 a bit lower.
Welcome to 2019. We started the year with 2.5 months of inventory (2018 started with 1.6 months) which is still low and favors the Seller but Buyers are also experiencing a very different market. The homes we sold in the fourth quarter averaged about $20k under asking price in the suburbs. Close-in Portland was still in demand and we still paid over asking in some cases, but we were only competing with one or two other buyers as opposed to five or six.
Looking ahead I see a market that continues to appreciate with inventory falling behind demand. Portland has a very strong job market that is likely to continue for many years. In addition we were the second most ‘Moved To City’ in the nation for 2018, creating more demand for housing. The Urban Growth Boundary is expanding in 2019 adding the potential for 9,200 new homes over the next several years. This represents the only addition to be made for the next ten years. An average of 920 new homes a year is far below the number of new household formations and relocation buyers needing homes. Supply and demand are not in balance.
I believe the biggest factor for the slow down is the high cost of homes in Portland Metro (average sales price is $452,400) and the rising interest rates. Together, these two factors price a large section of the population out of the home buying market. We tend to work with highly educated young professionals that can still afford to buy in our market. The high tech and medical professions have incomes sufficient to qualify for more than the average priced home. Relocation Buyers coming from higher priced states often find Portland very affordable.
In conclusion, I am expecting a strong less stressed real estate market for 2019. Buyer activity in early January is pointing to a busy Spring. Appreciation in 2018 was 5.5% and I predict that 2019 will be similar.