Supply-demand imbalance creates ‘fever’ among home buyers
PORTLAND, Ore. (KOIN) — Home prices in Portland are still surging, climbing higher than in the lead-up to the Great Recession. Several factors are contributing to the lack of local affordable housing.
The real estate wave is happening despite a year of unrest and Portland losing some shine off its national reputation, all while many people are out of work due to the pandemic.
Todd and Liz Fleischmann are moving out of Southwest Portland in the hopes of finding land and rural life in Clark County, Washington.
Five years ago, the Fleischmanns bought their home for $625,000. They listed it at $725,000 and, six offers later, sold the home for $816,000.
“One always dreams of a bidding war,” said Liz Fleischmann. “We’ve sold before and that’s never happened.”
Their realtor Katie Fracasso said, “There’s such an imbalance in the supply and demand that buyers are at an all-time fever to secure homes and the things that they’re doing to secure those homes is unprecedented… bidding wars, waiving appraisals, waiving inspections, as-is — you name it. We’re starting to see it all.”
To demonstrate how low the number of homes for sale is compared to the number of buyers, real estate agents look at how long it takes houses to sell. According to the latest reports from the Regional Multiple Listing Service which tracks home sales in this region, houses were taking a month to sell in January and February. They sold even quicker in March and April.
Houses were on the market three times as long in April of 2020 and 2019. The average price of a home went up 16.9% from April of 2020 to April of 2021, from $465,200 to $543,900.
Fracasso said she had a house near Glendoveer Park listed at $420,000 that received 11 offers and sold for $540,000. Another starter home in Aloha was listed at $379,900 and closed at $472,700 after 25 offers.
“My concern is that our region is going to become so unaffordable that the drivers — the tech firms moving from California — are just going to pass us up,” said Professor Gerry Mildner with PSU’s Center for Real Estate.
Mildner says Portland is affordable compared to other major West Coast cities — for now. He puts much of the blame for the region’s housing crunch on Metro’s urban growth boundary which limits which land is eligible for dense housing.
The contrast is visible in Washington County where homes line one side of a street and farmland lines the other, marking where the urban growth boundary separates the suburbs from rural living.
Mildner said the urban growth boundary is “a chronic problem.”
“Frankly, it all depends upon how it’s being managed,” he said. “The statutes say that we’re supposed to have a 20-year land supply inside the urban growth boundary. From my eyes, from my analysis, this has been completely — what’s the right metaphor? — hijacked.”
Mildner said local politicians have pushed for infill housing projects but those can’t keep up with housing demand. Mary Kyle McCurdy and the group “1000 Friends of Oregon” are big proponents of infill.
“I think that’s an ‘old saw’ that we keep hearing coming up,” she said. “You can look at any of the popular cities across the United States with or without zoning or urban growth boundaries or anything else and you see this issue playing out.”
McCurdy believes there is a 20-year supply of land for housing already in the urban growth boundary. She says the answer to skyrocketing prices is building different kinds of housing like duplexes and other multifamily housing.
Controversy has already played out in neighborhoods, where developers have torn down single-family homes and replaced them with multiple dwellings in what is called “lot splitting.” That scenario will not go away. The Oregon legislature passed a controversial law in 2019 allowing more mixed-use housing in neighborhoods where only traditional single-family homes have been allowed.
“Change is always hard, whatever the change is,” said McCurdy. “But that is part of the natural evolution of places and that is we want healthy schools, stores, neighborhoods — that is part of meeting the needs of all.”
Developer Homer Williams, one of the main driving forces behind Portland’s Pearl District, is critical of a well-intentioned law passed by the city of Portland in 2017 that requires developers to include subsidized units in apartment buildings. Williams says the measure is “an absolute failure” and only “a few people might be able to rustle up the financing for it.”
Williams has turned his attention to getting people off the streets and keeping others in their homes. He founded the Harbor of Hope shelter and is now proposing villages of low-income housing.
“I realized about four or five years ago that half the baby boomers were broke and we didn’t have a plan for them, so I figured I’d better figure out another way to house them because it’s not going to be in a traditional sense,” said Williams.
Williams is critical of a well-intentioned law recently passed by the city of Portland that requires developers to include subsidized units in apartment buildings. Williams says the measure is “an absolute failure” and only “a few people might be able to rustle up the financing for it.”
It will likely take years of building housing, in whatever form, to get Portland out of its high-priced predicament. Professor Mildner says the region is producing about 10% less housing despite the wild real estate market.
McCurdy says the region’s only path forward now is to support more diverse kinds of housing, which it should have been doing decades ago.
Meanwhile, bidding wars over houses rage on.