A recent March 21 article by Wendy Culverwell of the Portland Business Journal [“Cover Story: Land squeeze stalls Portland homebuilders”] offers a sobering view of Portland’s housing inventory and prices for the immediate future. Here is the take-away:
- Local and national homebuilders have been chastened by their not-so-distant memories of the credit and housing crash of 2008+. While they are tentatively coming back into the marketplace, it is not with the reckless abandon of the past. Partly this is due to lessons learned, but also due to the lack of available land.
- According to the article:
Metro, the regional planning agency, says that 7,277 new homes need to be built each year to accommodate the 1 million newcomers expected to move to the region by 2035. Area permitting agencies approved just 5,640 single-family home permits in 2013, according to the U.S. Census Bureau. While the number of permits being issued is inching up, it’s not happening fast enough to meet demand. And local builders aren’t showing any intention of filling the supply gap.
- The result is that housing prices, which are already up 18 percent from 2011, according to Ms. Culverwell, may impact affordability, and ultimately in-migration of workers.
- As I have reported for the last year or more, housing inventory is at all-time lows. This makes for an unhealthy marketplace for several reasons. First, it means that we’re in a seller’s market, where buyer demand exceeds seller supply. This drives up prices, since sellers are collectively seeing more competition for homes. Moreover, the inventory is not only small, but is unevenly distributed across the board. In some price ranges, there is little or nothing to choose from. Not only does this impact buyers, but potential sellers as well, since many folks want to feel confident in knowing that they will have housing replacement choices before putting a sign in their yard. The fear of finding no suitable substitutes will have a dampening effect on listings. According to the RMLS’™ Market Action Report for February 2014:
New listings, at 2,354 in February, fell 8.9% compared to January’s 2,583 new listings and decreased 4.0% compared to last February’s 2,453 new listings.
- Lastly, as pointed out in the article, Metro controls the Urban Growth Boundary, or “UGB” “…the invisible line that separates urban areas from rural and one of the main reasons land is in tight supply. Metro staff will submit a plan of attack to the elected board of commissioners this year. The plan will factor into the UGB decision due in 2015.”
Conclusion. Right now, the only prescription for sellers and buyers is patience. For sellers it is to be proactive in understanding the market, options, and timing. For buyers it is the same; know where you want to be and thoroughly vetting your financing options. Work with your mortgage broker so that you will have a pre-approval letter at the ready. [And don’t make new purchases on credit or apply for new credit cards – these things could reduce your FICO numbers!] Lastly, for enterprising Realtors®, it’s time to become an “information broker” offering up as much data and resources as possible, so that your clients will understand and appreciate the added value you bring to their selling and purchasing decisions.