Portland’s real estate market in 2023 was tough... for just about everybody. According to RMLS figures, the value of total sales in the metro area fell from $17.1 billion in 2022 to $12.3 billion, with both buyers and sellers withdrawing and ultimately leading to less transactions. By zooming in further, the picture becomes even clearer.
Nicholas Swann, a broker with Windermere Realty Trust, explained, “In a testament to the resiliency of the local housing market, the average sales price only dropped around 2.1% from 2022 despite mortgage interest rates climbing to nearly 8%,” he said. “The highest rates have been since the summer of 2000.”
As we look ahead, many are wondering if those dreadful interest rates will remain astronomical. In short, the answer’s no.
Rates to reverse course
Recently, mortgage interest rates lowered to 6.5%, setting up the first “normal” market in Portland since 2019. How does this translate to buyers and sellers? “The very best homes will still be getting multiple offers and above-asking price bids, but other homes will linger,” Swann said. “Buyers willing to look past the clutter will find some deals and sellers are much more willing to give concessions on price, interest rate buy-downs, and repairs.”
Seasons will also hold more sway, with high prices showing in the spring, followed by a late-summer cool down and stability in the fall. If interest rates duck below 6%, an imbalance might develop with more buyers entering the market and greater price increases.
Hot spots to watch
Several attractive areas on Portland’s periphery will entice first-time buyers with entry-level homes; places like St. Johns, Cedar Hills, and Milwaukie will offer more “bang for the buck.”
There will also be opportunities for “move-up buyers” in Southwest Portland neighborhoods like Garden Home and Raleigh Hills, where larger lots and square footage are available at better prices than comparable properties east of the Willamette River. Condos could also see sizable discounts compared to years past.
Oldies but goodies
Although personal preference dictates what style of homes will be popular — Craftsman and bungalow are longtime Portland favorites — you can always count on one selling point: a nice yard. “With more and more in-fill housing, a good yard is becoming increasingly rare,” Swann added. “We expect the most sought-after homes to be older homes which have been tastefully updated.”
Renting on the rise?
Even though the total supply of rental housing affects costs more directly than interest rates, they do correlate long term. “Portland renters are currently benefiting from the historically low interest rates we saw during the pandemic,” Swann said. “It kicked off a lot of multi-family building, which means we have had a lot more rental units coming onto the market in the last year and likely will for the next year or two.”
Stable or slight reductions to the cost of renting in Portland could be short-lived, however, due to a severe development slowdown in 2022 and 2023.