Portland Area Real Estate Appraisal Discussion

In the appraisal process, a real estate appraiser is usually most focused on the specific subdivision, neighborhood (or market area), and property type.  In doing so, appraisers typically deal with micro, and not macro, economic systems.  For example, the market for a million dollar home in Portland is likely different than the market for an entry priced property.  Consequently, an appraiser will typically examine statistics for similar-sized properties to develop an opinion of market segment health.  For this blog post however, let’s take the big view and look at what is happening in the overall Portland market.

The following are some of my favorite sources for gathering information about the Portland real estate market.

• Case-Shiller Portland Home Price Index is a monthly index that is calculated based on verified arm’s length transactions of twice sold single-family homes (repeat sales of the same property) in three different price tiers.  The index is a strong measure of price change for a market because it is not skewed by more low priced homes being sold in one year and more high priced homes being sold another year.  The drawback of Case-Shiller is that the data lags by three months.

   

  The most recent Case-Shiller Portland Home Price Index is for June of 2015 and was published August 25, 2015.  The index is currently at 182.14, which is nearly back to the 186.51 peak reached in July of 2007 before the housing collapse.  The index shows that prices have increased by 7.81% from last year, 1.54% from the previous month, and 4.74% in the prior three months.  In an earlier blog post I examined the seasonal trends in the Case-Shiller Index.  Based on the analysis of that blog, and what I know about the Portland market, I expect the Case-Shiller Index to increase in August and September before the seasonal price drop occurs from October through January.

   

• RMLS Market Metro Portland Action Report is a monthly report put out by Portland’s only multiple listing service. The report features overall statistics including inventory, pending volume, total market time, and median prices.  The most recent Metro Portland Report is for August 2015 and was distributed September 13, 2015. 

   

  Inventory:  The report shows that inventory has been down every month since July 2014 when compared to the same month in the prior year.  Inventory seasonally went up slightly last month from 1.7 to 1.9 months.

   

  Pending Volume:  The report shows that pending sales seasonally declined in August, but are up 24% for the year.

   

  Total Market Time:  At only 40 days, the average total market time for sales in Portland is now at its lowest level in three years.

   

  Median Prices:  The report shows that median home prices were down 0.5% for the month, but up 7% for the year.

   

• Portland State University Center for Real Estate Quarterly is a comprehensive quarterly report put out by PSU graduate students.  The report is supported by the Oregon Association of Realtors (OAR) and the Regional Multiple Listing Service (RMLS).  The most recent Residential Market Analysis is for May 2015.  Highlights include trends in local permitting, sales of new and existing homes, and sales to list price ratios for existing homes.

   

  Building permits for new private housing in Portland-Vancouver-Hillsboro MSA declined in the past quarter, but have been on an upward trend since 2009.  Even so, building permits are only about half of the levels seen in the three years leading up to 2007.

   

  Sales of new homes in Metropolitan Portland picked up most in 2013, and have slowly increased since then, but remain not even close to the levels seen prior to 2007, despite a historically low inventory. 

   

  Sales of existing homes in Metropolitan Portland are quite strong and are now close to levels seen in the three years leading up to 2007.

   

  The ratio of sales price to list price for existing homes in Metropolitan Portland has been hovering at or near 99% since 2012.

   

• Bureau of Labor Statistics maintains a Portland-Vancouver-Hillsboro Economy at a Glance page that includes employment, salary, and Consumer Price Index statistics. 

   

  Unemployment in Portland for July of 2015 is currently at 5.8% and had been trending downward, except for a bump up in the past quarter.

   

  Salary in Portland for July 2015 is up 4% from one year prior, but shows only a 7% increase from July 2007.

   

  Consumer Price Index in Portland is up 1% in 2015 compared to the first half of 2014.  However, prices are up 18% from the first half of 2007.

   

• Housing Affordability Index produced by the National Association of Realtors measures the median family income in relation to the median priced home.  A value of 100 means that the median family has 100% of the income to afford the median home loan.  The higher the index, the more affordable the home.  In 2011 the index for Portland was 155.5% and by 2014 it dropped to 134.7%.  Portland is still affordable, but not by the margins of just a few years ago.

The consensus is that the Portland single family housing market is clearly strong with increasing prices, low inventory, and bidding wars for some properties and areas.  The increasing prices appear to be riding atop favorable economic trends in employment and wage growth fundamentals.  The problem is that recent price increases are outpacing wage growth and affordability.  The current trend does not appear to be a bubble that will burst anytime soon, but it is unsustainable in the long term.  This is especially true if interest rates rise without corresponding increases in wages.  My hope is that in 2016 there is continued good news for Portland in terms of wage increases, that housing inventory returns to more historically-normal levels with additional new construction, and that home price increases are modest.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.