What Can OR and WA Homebuyers Expect From the Housing Market This Spring/Summer?
Summer and Spring Housing Market Trends in Washington and Oregon
We’ve already heard the trends: California’s tech and finance companies are migrating to the Pacific Northwest, creating an influx of talent and new home buyers. Because of this, over the past two summers, Washington and Oregon housing markets have witnessed a dramatic surge in prices (and in may cases, reduced inventory, as well).
While prices in Oregon and Washington’s housing markets are expected to continue climbing, there is a shift ahead. In the Pacific Northwest, a combination of increasing mortgage rates and rising home prices will inevitably lock more prospective buyers out of the market.
We’re here to shed light on the upcoming housing market trends in order to help you prepare for the buying (or selling) season ahead. We reached out to other industry professionals to get an inside look at spring and summer’s housing forecast, and how to prepare yourself for the competition ahead.
Rising Mortgage Rates and the Housing Market
In Oregon and Washington’s metro areas, home prices have continued to rise but the rate of the uptick has slowed. This suggests that key cities in Oregon and Washington, like Seattle and Portland, are potentially approaching the limit of affordability. One key reason for the slowed increase could be that mortgage rates are on the rise.
This winter, the Pacific Northwest housing markets witnessed an unusual fervor, as buyers raced to buy homes before the average 30-year fixed mortgage rate climbed back over 4%.
As we head into the spring and summer seasons, mortgage rates are expected to continue rising. According to loan software company Ellie Mae, “the *30-year mortgage rate now averages 4.72%.” For the months ahead, mortgage rate predictions are expected to trend upward as high as 5%.
While these rates are still better than 85% of mortgage rate history, the steady rise will likely impact buyers who can’t afford the new rates.
According to Joel Morgan at Options Financial, “entry-level homes, where the spur of the market always comes from, are very competitive and are now priced up to $500K.” But Morgan also notes a few key challenges:
- Increased Competition: Houses for sale below the $500K range tend to be competitive with investors, cash buyers from out of state/country, and are in high demand with first-time buyers.Tolerance: We are truly seeing price tags hit the upper level of tolerance for what buyers will pay, which is cooling the competition some and will likely impact the market through the summer. Buyers will still be buying, as waiting will only impact even higher prices later – but begrudgingly.
- Scarity of Land: The availability of land in Portland continues to be an issue. Tight urban growth boundaries continue to add to the pressure of land cost, which is then rolled into housing costs
Even with these issues impacting the market, Morgan still “expects to see a very active market this summer.” Given the fact that Portland is still a destination for new businesses, and construction is only achieving approximately 60% of what the population growth demands. “That doesn’t even account for the backlog of demand from the recession,” he says.
Either way, “rates are still low (historically speaking) but are moving upwards while lending practices are still smart and money is available,” Morgan offers.
Slim Inventory Is Predicted for Months Ahead
As rising mortgage rates force hopeful buyers to pump the brakes on purchasing a home, there’s another reason for fewer sales and fiercer competition for 2018 housing markets: waning inventory.
According to The Oregonian, “The number of homes newly put on the market [in Portland] was only slightly higher than this time last year… Anything below six months of supply typically indicates a seller’s market. That sets the stage for another spring and summer buying season characterized by a slim inventory.”
While condos and apartments are being built all over Oregon and Washington cities, today’s buyers tend to still be searching for traditional, single-unit family homes.
Dave Nielson, CEO of the Home Builders Association of Metro Portland, notes that “while price appreciation is slowing, the market is still strong.” Citing among several potential factors keeping the market strong, Nielson says “that we are still under-building and have a historically low inventory of homes compared to normal market demand.”
With “a tight labor supply, a limited amount of development-ready land, and building processes in many parts of the city that create uncertainty,” Nielson suggests that potential delays and higher costs could hurt the market’s ability to respond as dynamically as needed when it comes to providing what most home buyers are looking for.
According to Ris Media, spring and summer buyer preferences reveal that “the average buyer is on the hunt for a three-bedroom, two-bathroom home, complete with a garage and a kitchen that is updated.” But the availability of traditional homes is shrinking.
In Portland, owners aren’t selling in fear that they couldn’t afford another home in the area. In Seattle, owners are holding on to their properties, hoping to wait a few more years to flip homes for added profit.
So what does this mean for buyers in Oregon and Washington this spring and summer? It’s going to be tough for many first-time buyers to afford homes in metropolitan areas unless they are prepared to make cash offers. High demand areas will see bidding wars, and other commuter cities, like Salem and Bremerton, will likely see a spike in housing costs and values.
How to Prepare for Another Busy Buying Season Ahead
How can you stand strong against the competition from other Washington and Oregon home shoppers? Start talking to a mortgage broker sooner rather than later. A mortgage broker will help you navigate financing options so you can walk into an open house pre-approved, and ready to place your home offer early and with confidence. Ready to navigate the housing market this summer? Options is here to help.
You Deserve Options When It’s Time to Buy a Home
At Options, we know that getting into your first mortgages can be a complex, potentially stressful undertaking – especially when it’s your first home.We’re here to help you through the process, working closely with you to determine which home funding options represent your unique circumstances.
With a better understanding of who you are, we can make educated recommendations to help you attain your ultimate goals. Ready to get started? Get in touch with one of our expert team members today.