Will the real estate market in Portland, Oregon crash in 2020? Will home prices drop or rise over the coming months? These are common questions among those planning to purchase a home in Portland. Here is an unbiased, up-to-date housing market assessments to help you decide.
Will the Portland Housing Market Crash In 2020?
To answer this question, we must first understand what a real estate “crash” means. There is no standard definition for a housing crash. Generally speaking, this term refers to a significant and sustained drop in home values. We saw plenty of this during the latter part of the previous decade, when the nation’s housing market collapsed.
Based on that definition, it seems unlikely that the real estate market in Portland, Oregon will crash in 2019 or 2020.
But home prices in the city are definitely dropping, as of fall 2019. According to the real estate information company Zillow, the median home value for Orland dropped by around 2% over the past year. Looking forward, they predict that prices will take continue to decline into the fall of 2020.
In September, the company’s research team wrote:
“Portland home values have declined -2.1% over the past year and Zillow predicts they will fall -2.1% within the next year.”
They have also labeled Portland as a “cool” housing market, which means that current real estate commissions tend to favor buyers more than sellers.
The chart above, created by Zillow, shows an estimate of the median home price for Portland going back nine years or so. You can see where values declined in the wake of Great Recession (left side), followed by a sharp rise that began in late 2012.
On the right side of the chart, you’ll notice how home prices in Portland have dipped. The company’s forecast is shown in the green shaded area.
Elsewhere in the state, house values are still climbing. The median home price for the state of Oregon rose by around 3% over the past year. Some cities, like Salem and Eugene, have seen even bigger gains. And here’s a report from a local agent that points to rising prices in the Grants Pass area of Southern Oregon.
More of a “Correction” Than a Collapse
As mentioned, home prices in Portland are clearly declining in 2019. And they have been for some time. But that doesn’t necessarily constitute a housing market crash or collapse. It’s more of a “correction.”
Home prices in the Portland, Oregon area skyrocketed over the past six years or so. This was largely due to severe inventory shortages and strong demand from buyers. There were plenty of buyers and investors in the market, but not enough homes to meet demand. That put tremendous upward pressure on prices.
As a result of those conditions, the median home value in Portland rose by nearly $200,000 from 2012 to 2018.
Today, housing affordability has become an issue in the area. It has become increasingly difficult for a “typical” buyer to afford a median-priced home in the Portland real estate market. That, above all else, is why home prices in the area have stalled.
This is a pattern we have seen in many major metro areas over the past few years. Inventory shortages, combined with strong demand, have sent home prices through the roof. This leads to affordability issues, which in turn cause some buyers to shy away from the market. That’s why we are currently seeing price declines in formerly red-hot real estate markets.
But Portland is not having a housing market crash in the classic sense of the term. It is merely a modest decline in home prices following a rapid and unsustainable increase.
Housing Inventory Is Still Tight
Don’t let Zillow’s “cool” market assessment fool you. Real estate inventory remains tight within the Portland area. So buyers are still competing for limited inventory.
According to the national real estate brokerage Redfin, Portland had about a 2.5-month supply of homes for sale as of August 2019. That was slightly below the national average for the same time period, and well below what is considered to be a “balanced” real estate market.
In some ways, the Portland real estate market is a paradox right now. Normally, when a housing market has a low level of supply and faster-than-average home sales, prices would be climbing steadily. But as we have seen, values are actually declining in the Portland area. It’s an unusual time.
Population Growth Has Boosted Housing Demand
The population of Portland, Oregon has increased steadily over the past few years. This should come as no surprise to local residents, who have seen one news story after another about people relocating into the area.
According to the U.S. Census Bureau, Portland’s population increased by 11.9% from 2010 to 2018. That was nearly double the national population growth rate of 6% for that same time. Many of those new residents moved to Portland from more expensive real estate markets, with the specific purpose of finding affordable housing.
A report published earlier this year by the Oregon Employment Department showed that more people have moved into Oregon than left over the past few years. This has increased the demand for housing, among renters and buyers alike.
Our Forecast: A Short Downturn Followed by Rising Prices
Our assessment is that the Portland real estate market is clearly experiencing a downturn in terms of home prices. But it’s not a full-on housing market crash or collapse.
The city and surrounding metro area still have all of the fundamentals for a strong housing market. Supply is limited while demand remains strong. The local economy is in good shape with a favorable employment rate. And the city continues to attract new residents from elsewhere in the country.
Based on these factors, we expect the Portland real estate market to experience a short period of declining prices, after which home values will begin to rise again (more gradually).
Disclaimer: This article contains predictions and forecasts for the Portland housing market, some of which were made by third parties not associated with MetroDepth. Real estate forecasts are the equivalent of an educated guess and should be treated as such.