In December 2016 I said, we’d see easing of lending restrictions and consumer protection measures in lending, inventory would remain low, and the median price wouldn’t increase more than 10%. I said we’d see interest rates rise, that the small, expensive newly constructed apartments would become over-supplied, Portland would probably see some rent control measures, and President Trump would ease lending restrictions.
The Trump administration is easing some lending regulations, and pulling back on some of the consumer protections of the CFPB. We are seeing the return of “no doc” loans; loans to those with good credit ratings and sizeable down payments, who don’t have W-2 income with which to qualify for a loan. We’re also seeing “desk appraisals”, that is, an actual site visit and appraisal report are not done by a licensed appraiser, but rather a computer program/algorithm assesses the value of a property. Combined, this means people who might not qualify for loans are, and property values aren’t being scrutinized. Hmm. I don’t love this, even if being right feels good.
Our median price increased by 9.5%. I was right! Interest rates rose, but not significantly. I was right! Small, expensive apartments do appear to be over built as they now offer a variety of move in specials. The rental market has slowed a bit, with rents not escalating as quickly.
Portland continues to be in a housing crisis for low income tenants, and the houseless. The City of Portland extended the “housing emergency”, restricting landlord’s ability to move tenants out, without a lease violation. The City is proceeding to put together an office of Landlord-Tenant affairs. Landlords (myself included) are wary of the city further regulating rentals. I’d much rather see the City make it easier and cheaper to build low income housing and pursue non-conforming Airbnb “hosts”.
Beginning in January of 2018, properties being marketed for sale, in the city of Portland, will be required to have a Home Energy Score, with an assessment, done by a provider so licensed. We’re guessing they’ll cost around $300. Sellers will need to get the assessment and score BEFORE putting their house on the market. “For sale by owners” are also subject to this rule, if they are to publicize their property for sale. The score is on a scale of 1-10, and is a product primarily of the soundness of the building envelope, combined with the efficiency of heating and water heating. Our house, built in 2003, got a score of 9! As it is newer, it is well insulated. We don’t have a fancy furnace, nor fancy hot water heating (though both are gas). We do have solar. Without the solar, our score would have been a 7.
This year’s market was a bit like that of last year, but that our busy times were not quite as crazy, and our slower time, perhaps a bit slower. While multiple offers still exist, there are usually 2-5 offers, if there are multiples at all. In 2015 and 2016, some houses were seeing 15 – 20 offers. Aspirational pricing is still a problem, with sellers slow to accept the news of a slightly slowing market. This leads to price reductions and longer market times as properties sit, and suffer from the “there must be something wrong with that one” phenomenon.
My crystal ball is still blurry! At this writing, the house and senate have both passed tax reform bills, that are now being reconciled. Without getting into the minutiae of the yet to be agreed upon bills, here are a few highlights. There is talk of lengthening the time a homeowner must own their home, to claim the tax exemption (when selling) of $250,000. The rule has been one must live in the home two of the last five years, with the proposed rule would requiring a full five years of occupancy. The other change being discussed would limit the mortgage interest tax deduction. The National Association of Realtors projects: “If both mortgage interest and real estate taxes deductions will be eliminated, home prices expect to fall from 9% to 13%. A decline in value as projected could mean a loss in home value of $28,130-$42,200 for the typical homeowner.”
Whatever the case, I do expect we’ll continue to see a slowing on the rate of appreciation. Look for our median sales price to increase around 8% in 2018. This is still healthy appreciation, and far more sustainable than even the 13.1% we saw in 2016.
Portland continues to be the “affordable” option for the west coast, and a popular destination for people from a variety of demographics. We’ll continue to see considerable cash purchases as baby boomers secure their retirement homes and transfer their wealth to the younger generations.
With a slightly slowing market, we’ll see some real estate agents leave the business – mostly part time agents who have a harder time closing enough transactions to cover the costs of doing business. We’ve seen a few mergers and buy outs of real estate companies this fall, and may see more of those, especially the consolidation of smaller companies.
I remain honored to help folks with some of the biggest decisions in their lives, and humbled by the trust that is put in me. My business is based on referrals. I will always take good care of anyone you send my way. Be it selling or buying, or just curious, I’m always here to help, answer questions and provide information.