2015 was an excellent year for the real estate market in Portland. Usually, after such a great year we tend to hold our breath waiting to see what the next year will bring, typically expecting things to slow down. So far, we have yet to see any sign of a slow down. With a stable stock market comes a more optimistic view of the economy, and that of course is always good for business, no matter your industry.
The Federal Reserve’s anticipated interest hike in June is projected to be low, another factor contributing to the general market optimism. What does the rate increase mean for the individual, specifically those looking to purchase a home? As economist Diane Swonk explains, “it’s really important to understand that access to credit cards, access to mortgages—things that were very difficult during the crisis and frankly for many years now—are now starting to pivot. Even as rates go up, consumers may find they have more access to credit, it’s only slightly more expensive. On the flip side of it, savers get a little bit more in their saving, although, not much. We’re still talking about extremely low rates.”
In the Portland metro area, current statistics show that nearly 42% of all home buyers (for homes under $450K) are cash sales. Interestingly, many of these sales are out of state buyers (including many retirees). It is also worth noting that not only has central Portland’s general real estate market continued to grow, but the average home price is now 50k more than around this time last year. This is likely one reason that condos and townhouses in central Portland are seeing a rise in sales, while detached single home sales are on the rise in areas just outside of central Portland.
While many people may be waiting for prices to drop in central Portland, this is clearly not deterring the majority from moving forward and purchasing. So when will that drop happen — 1 year? 2 years? Of course only time will tell, but when it does happen it will likely be at the expense of increased mortgage rates. With increased rates, your monthly mortgage payment may still be the same as if you had purchased earlier, at a higher price. Considering these facts, many buyers are choosing to purchase homes that are perhaps not quite what they had originally imagined, or maybe located in less desirable areas. This allows them to start building equity while fixing the mortgage rates for 30 years — not a bad idea at all.