Interview With Joel Morgan of Options Mortgage on the State of the PDX Market

The State of the PDX Market from Joel Morgan

The housing market in Portland has been growing steadily over the last few years, with some signs of slowing down but no signs of stalling out. During 2017, we’ve reached out to professionals from all aspects of the industry, from Realtors to construction companies, loan officers, title companies and more, asking them to weigh in on the current market in PDX, and might we might be headed for in the new year.

With so much insight to be gleaned from those in the mortgage business, we thought it wise to follow up with one of those specialists from previous outreach efforts – Joel Morgan of Options Mortgage. In this interview, we ask Joel a few pressing questions to take a deeper dive into the market here in our city, and to offer as much insight and as many key tips as he can manage for those looking to buy, sell, or refinance a home.

Q1 – Do you see the PDX housing market cooling off a bit, and if so, what do you think may be the underlying cause(s)?

I believe that we are hitting a ‘tolerance’ ceiling by the consumer, where the price point for homes may not be emotionally worth what they get. We’ve seen this happen in other markets that are ahead of us – California, for example, ‘cooled’ last year due to a similar issue.

But the concept of “cooling” needs to be defined. The underlying fear held by many is that we have a bubble and home values will depreciate. Cooling can mean that the high rate of appreciation can ‘cool’ to a more sustainable rate of appreciation.

In other words – we cool from a 20% appreciation rate to a 10% or even 5% appreciate rate. In each of these cases – they are still both positive appreciation rates, with stable and healthy markets; they’re just not sustained at excessive appreciation rates.

Q2 – Can you offer a behind-the-scenes look at current inventory that may offer those who are on the hunt for a home something new to consider?

We are seeing some current for-sale inventory lower their prices out there. This does not mean that home values are coming down – it means that aggressive sellers and their agents are realizing that they cannot excessively price a home over what the market will currently bear.

A lowering of a home’s sale price means that $400k may be the appropriate sales price, and not $410k. But $400k is still an increase above the price it would have sold for 3 months ago at $395k – just as an example.

Q3 – There’s always backroom talk about a housing bubble. In your experience, what leads to a bubble, and is Portland in any danger of that occurring again?

Economically, we do not have bubble conditions, and this is well supported by many leading economists. A bubble means there is weak/false support for increased value. Currently, however, we have strong/compliant lending, increasing jobs (low un-employment), as well as improved consumer confidence.

The reason we have strong markets is due to the low inventory, a lack of new construction from 2009 – 2015/16, an increase in new families, and locally in Portland – new job growth markets/influx. While that has slowed a bit, it is still positive.

Q4 – So what do you think the future holds for the housing market here in PDX? What external factors, be they national headlines or local weather events, could be influencing the market?

Here are a few things worth paying attention to:

Global factors:

  • S. administration is not producing the results it promised
  • North Korea is producing anxiety and uncertainties
  • Large Hurricane damage in the U.S. will impact business/energy
  • Questions and changes in the Euro Markets
  • Feds looking to sell off Mortgage Backed Securities over time

Local factors:

  • Growing local markets
  • Strong influx of families moving in (lighter than it was 1-2 years ago – but still strong)
  • Urban growth boundaries promote high land values
  • Urban growth boundaries cause limited building locations
  • Mild weather compared to other sectors of U.S.
  • Strong water sources compared to other sectors of U.S.
  • Large areas of planned housing starts – especially south Hillsboro area


  • Most National factors look to keep mortgage interest rates low (relative) for the near future.
  • During August and September, we entered the lowest rates of 2017
  • Local factors will support a strong/healthy housing market.
  • Low inventories will begin to ease as new inventory is built in sufficient quantities.

The combination of tight inventories loosening over time, a healthy influx of new families, and good job markets should loosen the market but still maintain a healthy appreciation rate that is hopefully more sustainable long-term, closer to a 5% average.

Q5 – What advice would you offer Realtors working in the Portland market from your perspective on the mortgage and lending side?

To ease the market, we need current owners to move up and sell their current homes to new buyers, but that is a real challenge for those homeowners. They don’t want to sell first and then be ‘homeless’ because they can’t purchase a new home.

Placing an offer contingent on your sale is usually not accepted. So how can we help that? Answers include using some unique and successful financing structures that allow for non-contingent offers, but not selling first. One example is the use of bridge loans; this will allow you to access the equity in your current to be used on your new home purchase.

It should also be noted that average home sales in the Portland market are reaching the limit of conventional loans ($424,100). This means more people are running into new and different requirements for using non-conventional loans (Jumbo, 2nds, HELOCs, etc).

Most buyers are able to qualify for these home loans based on income and credit; the challenge is the larger down payment requirements. The good news is we are seeing financing options at these higher purchase prices with down payments that are now as low as 5%.

The down payment requirements used to be higher, but the market is understanding the changes and obstacles, and we now have options for those buyers that can qualify based on income and credit, but not the down payment.

Q6 – You’re sitting with a first-time homebuyer, maybe a husband and a wife with a young family. What is the single most important piece of advice you can give them to help them find success?

Planning is the most important step that any family can take. There are so many loans, loan options, and loan structures, that investing a little time upfront to better understand those options can make a world of difference on the long-term impact of purchasing a home.

To maximize planning, it’s really important to have a clear understanding of your ‘why’ – that’s key. Why are you purchasing a home?  Is it for a short-term ownership with a plan to later move up? Is it to begin owning real estate that you will turn into investment property later? Is this a forever-home, similar to what your parents did?

Understanding your “why” of home ownership and then providing time to plan successfully with financing can produce an exceptional outcome.

Q7 – What has changed in the Portland housing market over the last few years that you think others may be overlooking, or not paying enough attention to? Why do you think that is, and what will be the effect?

I’m concerned about home values in general. There is a lot of talk about this, but I am concerned about two points that I don’t hear enough about.

First, home purchase prices are exceeding the max conforming loan limits of $424,100. When a client only needs a loan of this size or less, there are many opportunities that support their financing success, which includes low down payments, acceptable credit scores, and acceptance on income sources.

But when a borrower is purchasing a home that requires financing above conventional limits, there are significant impacts on down payment requirements, credit, and tolerance of income sources. This means there is a significant decline in borrowers that will be approved for this type of financing, which will impact our market.

The second point of concern that helps cause the pricing issue in addition to influx of population and a strong market is the Urban Growth Boundary. While this limitation has many positive impacts, one negative impact is that it limits the available land we can use. This creates a shortage of supply, and forces an increase in land values that then translate to increased home prices (and rental rates).

A review of our current land use laws may be the ideal solution to sustainable home value appreciation rates, more affordable housing, and bringing the average home price and loan needs well within conforming loan limits, allowing for more accessible financing for young families.

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