What's going on with the market? Are we in trouble?
As August comes to a close, we're seeing Portland move into what we consider a normal real estate market, meaning the seasonality of real estate has returned. Despite remaining historically low, inventory (currently at two months) has increased to its highest level since May of 2020 and has more than doubled since April of 2022. While this increase in inventory has given buyers a bit more leverage, it’s important to note that at our current levels, we’re still situated solidly in the sellers’ market and won’t shift toward a buyers’ market until we hit levels of 4+ months inventory. A question we’re hearing a lot these days: Is the real estate market crashing?Our answer: No, the market isn’t crashing, but it IS cooling off.
However, this cool off was needed to stabilize the market after the unprecedented activity of the last two years. We’ve seen cycles of ebbs and flows before in Portland but unlike past cycles, we don’t have an oversupply of homes available this time around. Typically in a real estate cycle, we’d hit a phase called “hyper supply” where there’s more housing supply than there is demand. However, currently we're still facing a shortage of homes in the area with more years of shortage predicted ahead. So, what does this all mean? Long story short, we believe we're moving back to a normal market. This means sellers shouldn’t panic if they haven’t accepted an offer within the first few weeks of listing and buyers today might be able to purchase a home with a closing cost credit or a reduction in the list price. This is a big shift compared to the peak of the market in March 2022 where it was extremely hard for even a cash buyer to win a bidding war when offering well above list price. We also believe the seasonality of real estate is back. We predict more homes will come on the market over the next 60 days and currently listed homes will stay on the market longer (with overall accepted offers on average within 45 days or less).
How Rates Affect Home Appreciation:
While home appreciation over the last 24 months has been significant, we’re now starting to see price drops on a weekly basis. Up to 6% interest rates have made affordability a lot tougher for many families. That doesn’t mean people won’t still move for all types of reasons, but many will choose to hold onto the lower mortgage rate they have unless a move is necessary.
For anyone with an interest rate of 3.75% or lower, you’re currently seeing the benefits of buying when you did. Just a 2% increase in the interest rate has a huge impact on affordability and monthly payment. Ultimately, the rates can impact affordability, the buyer pool, and price appreciation on homes.
Market Action Report
In July 2022, 3,793 new listings hit the market (a decrease from the 4,267 listed in July 2021). In June 2022, 4,295 properties were listed in Portland Metro and we had 2,445 homes accept an offer / go pending, a slight decrease from the 2,563 offers accepted in June 2022. Year over year, this number is down more significantly - a 27.1% decrease from the 3,354 accepted offers in July 2021. Closed sales are down 31.1% year over year and 18.1% month over month with 2,369 closed sales for July 2022.
In a balanced market, it’s normal to see a slow down toward the end of summer. Since we’ve had a very unprecedented market these past couple years, we’ll see how these numbers change in the fall. We should see an increase in accepted offers as we get closer to Thanksgiving.
Making The Most Of The Final Days Of Summer
We hope you’ve had a summer filled with fun, laughter, awesome new memories, and love. Austin & I have had a busy summer and some of our best times have been when we’ve gotten our families together for some fun in the sun. It’s been so great watching Trenton & Nolan grow and develop so much these past few months. Trenton (2 years old) is loving the swing at the park and Nolan (1 year old) is now “on the move” and loves to play.
We encourage you to get outside while the weather is still nice and enjoy some quality time with loved ones. Nature is such a special place to be present in the moment and connect with ourselves and our families.
For all of you who have kids going back to school, we wish them a wonderful school year ahead!