I’m sure you all remember the housing market back in 2010. Home buyer tax credits just expired. A housing market rebound seemed out of reach for most potential buyers and market analysts. Unemployment rates stood high and consumer confidence had plummeted. However, certain states that harbored hope for the future stood out among others. Oregon was one of them. According to a 2010 Fiserv Case-Shiller report, market experts listed Bend, Oregon as one of the county’s leading markets in terms of growth. At the time, experts predicted that prices would increase by 33.6 percent in the 2014 Oregon Housing Market. Oregon’s 2013 rate of growth confirmed those predictions. In 2013, the state’s economy accelerated. The Oregon Economic Review and Forecast report for 2014 predicts much of the same this year. If you wish to read last year’s report on Oregon, click here.
Several economic factors will undoubtedly influence the 2014 Oregon Housing Market. The forecast in question says the state will continue a sustained pace of economic acceleration in 2014, much like it did in 2013. Some of the improvements in this respect include:
- A strong job growth pace – the most rapid one the state has seen since 2006. In the first three months of 2014, 4 out of 5 counties in Oregon outside the Portland Metropolitan Area picked up speed in terms of job gains.
- An improved housing market, which grew at three times the average pace of other industries over the past year. The government expects household formation to improve, unemployment to drop, and young adults to move out from their parents’ homes. Oregon’s massive spike in the rental market during the recession is now all but over. The report forecasts 1.05 million housing starts in the U.S. this year. Oregon accounts for 14,600 of these new homes alone. Statewide, this indicator should be up by 4,000 new homes from last year.
Compared to the lowest point of the recession (which occurred between 2009 and 2010) housing starts for 2014 in Oregon expanded by 80 percent. Prior to the housing bubble that created the recession, the long term average for the state was 21,000. Nowadays, experts forecast the long run average at slightly over 23,000. This pace should keep up with the demands of an increasing population as well amend the historically low construction levels of the past few years. The housing bubble created massive overbuilding all over the state. Even after factoring this into account, the rate of construction for new homes is about one year behind the steady levels of growth experienced in the 1980s and 1990s.
Forecasts for the 2014 Real Estate Market in Oregon appear optimistic. These forcasts build on the unexpected growth witnessed in 2013. Oregon Live recently quoted Brian Allen, the owner of Windermere Cronin & Caplan Realty Group, as stating that he expects the buying market to remain competitive in 2014. The prices of homes are increasing along with interest rates. Conversely, home supply remains rather low. These factors make Oregon a strong seller’s market in 2014. Market experts expect serious buyers to make a move soon as prices and rates continue to expand. The continued presence of investors further complicates the situation for traditional homebuyers. These investors wish to buy and then rent/flip homes in search of profit. Market analysts expect their presence to diminish as home prices continue to rise. For the time being, the investors are cornering the low-end housing segment of Oregon’s real estate market.
In 2014, the U.S. Federal Reserve will slow down its housing market stimulus. The Federal Reserve plans to spend some $10 billion less per month on buying bonds to keep mortgage interest rates at historic lows. Rates reached an all-time low of 3.31 percent on a 30 year fixed mortgage rate in November 2012 according to Freddie Mac reports. Even a 1 percent increase would keep rates at historically low margins. However, analysts expect this slow increase to push some of the potential buyers to make a move in 2014. Oregon realtor Brian Allen explains that first time, potential buyers usually shop around when they are most able to qualify for a loan. If interest rates move up by a single percentage point, they may lose 11percent of what they can qualify for.
In terms of price increases, most forecasts of Oregon real estate predict the rising rate will slow down in 2014. This reduction arrives after eight straight months of real estate prices being 10 percent higher than the year before. The continued increase is perceived to be non-sustainable according to the latest Standard & Poor’s/Case-Shiller home price index. This index analyzes the changes in housing prices through October 2013.
Market analysts expect several areas of Portland to contribute to the continued upswing of the state’s real estate market in 2014. Portland’s Central Eastside District stands at the top of the list. As far as areas in Portland’s Central City go, many expect this area to be a prime target of redevelopment in 2014. The 692.3 acres of land account for 35 percent of the city’s job growth over the past five years according to the spring 2014 Center for Real Estate Quarterly Report. Given the specifics of the Central Eastside District, experts expect massive industrial office development there. Several projects already exist in the pipelines.
In 2014, analysts expect the multifamily housing market to continue as the main, active market in Portland, Oregon. Several tertiary markets are experiencing cap rates and scale. In turn, this inspired many local developers to redevelop, repurpose, and build multifamily housing units across the state. With jobs and population numbers both on the rise, analysts expect that the local supply and demand ratio will remain balanced in 2014 with some potential for change. The state expects to finish its project of 657 housing units by the summer of 2015. With a vacancy rate of 2.1 percent (which is lower than the U.S. average of 4 percent), analysts expect the Oregon rental market to perform well this year.
A RMLS fellow report expects the single family housing market to continue to recover. An upswing in both home sales and prices has been forecast with a median sale price of $315,320 for new homes in the Portland metropolitan area expected this year. The report expects pre-existing homes to sell for a median price of $287,000. The Central Oregon single-family housing market should also see some improvement. However, the fluctuation of these quarter-to-quarter reports from this segment of the market makes forecasts difficult. Meanwhile, slight price decreases or, at best, stagnation, are expected in Willamette Valley and the I-5 corridor.