It’s the season of leaves, leaves and more leaves! We hope you were able to enjoy the beautiful Fall days we had recently before the rain arrived.
For us, Fall is a good time to visit the current state of the real estate market and consider the future implications. We would like to provide you with a market update and answer some of your burning questions.
Lastly, if you are needing a break from cleaning up all of those fallen leaves, we’ve put together a few ideas of fun local activities for you to try this season. We hope to see you there!
MARKET UPDATE FROM KATHY
I don’t always get to do this but this time I am going to pat myself on the back because it looks like my predictions in my last few market updates have borne out.
As we’ve been reporting, the market has been slowing mainly due to the following three factors:
- Increase in interest rates.
- Fundamental changes in tax laws regarding eligible deductions for real estate investments.
- To some extent, a little Buyer fatigue. That is to say, Buyers may perceive that sellers are asking higher prices for less than desirable properties and/or conditions.
With that being said, there is a silver lining. This is an authentic opportunity for buyers to have more choice and to purchase properties at outstanding values. Admittedly, most properties on the market are still overpriced, but I would say that at least 25% have either had terrific price reductions – bringing the price to where it should be – or many new listings are coming onto the market with very favorable buyer pricing. This has caused sales and in some cases multiple offer situations on this well priced segment of homes. Buyers still want to buy but the home has to be the right fit for them, emotionally and financially, and in the right condition for its price.
I see a lot of the homes that are not selling on the market have not made a necessary and correct price adjustment. Once a home is priced where it should be it will sell unlike 2010-2013 when there was not a buyer pool.
Many of us are hoping that we will see an uptick this spring in prices because that has been the typical pattern for the last several years. I am not convinced that you can count on this however, I do not see prices falling further from where they are today if the home is accurately priced.
In my opinion, at least over the next 1 to 2 years, we are headed towards what was considered a “normal” market 15 years ago. What I mean by “normal” market is that homes sell within 3-6 months of being listed with the final sale price typically occurring after a small 0.5%-2% negotiation between the seller and buyer on an accurately priced home. In this “normal” market, unless you want to fire sell your home, you have to be patient.
I am very bullish on Portland. Portland was early in the price increases and early in the price adjustments. This is a short term leveling off to prepare us for future robust appreciation rates
Please click here to view the October 2018 Portland Metro RMLS Market Action Report for even more details.
REAL ESTATE MARKET FAQs
Answered by Team Broker/Escrow Manager Rykie Kelly
1. What does the increase in interest rates mean for Buyers and Sellers?
Since the start of 2018, the average rate for 30-year fixed rate mortgages has climbed from approximately 4% and is now hovering in the very high 4’s. We are even seeing rates as high as 5.25%. The Fed raised the prime rate when they met in October for the 3rd time this year. They are meeting again in December and most analysts expect them to increase the prime rate once again which will gradually trickle down to impact home mortgage rates. It appears that this trend of increasing rates will continue.
Buyers should consider that as interest rates climb, their purchasing power decreases. For example, if you were looking to purchase a $500,000 home with a conventional mortgage rate of 4.75% and 20% down-payment, your monthly payment (not including property taxes or homeowners insurance) would be $2,087.00.
That same purchase price with an interest rate of 5.5% would result in a monthly mortgage payment of $2,271. To keep your mortgage at $2,087.00, you would need to keep your purchase price at approximately $460,000.
Sellers should consider the same effect on purchasing power as Buyers do. In addition to less purchasing power, the increase in interest rates also shrinks the number of qualified Buyers who will be able to purchase your home.
2. Is it a good time to sell or buy?
Right now is it a great time to both buy and sell. Here’s why:
For Buyers, mortgage interest rates are still historically low and list prices are adjusting lower in response to increased inventory and decreased Buyer demand. Take advantage of the current interest rates before rates increase again. The Fed is meeting again in December and is expected to raise the Federal Reserve Interest Funds rate for the fourth time this year.
The most interesting bit of news that Buyers should be aware of is that we are seeing a very large spread in interest rates among Lenders. One of our favorite lenders recently stated that this is the “largest spread in interest rates that he has seen in his career, with almost a half a point difference among lenders with rates from 4.875 all the way to 5.375%.” It is a good time to shop Lenders for the best rate. We’re happy to provide you with some excellent recommendations.
Sellers will find that not only are there buyers out looking in the fall and winter, but they are typically very motivated. You may have less showings, but the people who come through will be serious!
Click here for an article from Realtor.com that details 6 reason why selling in the winter can be advantageous.
3. Are price reductions the new normal?
Inventory has increased and Buyers are being more patient and actually waiting to see if price reductions do occur.
As a Seller the key to avoiding price reductions is to price correctly to start with keeping in mind that you want to stay ahead of the market. If you aren’t getting any momentum, take price reductions quickly. It’s ok to be wrong but don’t be wrong for long!
This has been one of the hallmark successes of The MacNaughton Group. Kathy is highly adept at accurately assessing the current market value of a home and believes in providing sellers with her honest price evaluation based on current market trends and analysis of where the market is headed so that their home will sell.
REAL ESTATE FORECAST FROM TWO ECONOMISTS
“Battle of the Economists”
Matthew Gardner – Windermere Chief Economist and
Dr. Thomas Potiowsky – Director of Northwest Economic Research Center
Matthew Gardner (Windermere Chief Economist) and Dr. Thomas Potiowsky (Director of Northwest Economic Research Center) provided Windermere agents with insight into the changing market at a recent Windermere agent event.
While both economists believe we are currently in an economic sweet spot, there was some disagreement on what might happen and when. Placating us by saying that no economic expansion could last forever, Gardner believes that an economic downturn is coming around 2020. However, Potiowsky isn’t so sure. While he agrees that every hot period has an expiration date, something has to set off a downturn and he isn’t sure what that might be. For Gardner it’s the international trade wars the U.S. is currently experiencing.
In the Portland metropolitan area specifically, we heard that housing prices are still rising, but at a decreasing rate, which both economists agree indicates a healthier, more balanced market. Another positive local sign is that rents are flattening out. Even migration into the state is starting to slow but “for the right reasons.”
Both warn us to expect higher mortgage rates. Gardner predicts they will reach 5.5 percent by end of 2019, which “everyone, except for the Millennials, still thinks is remarkably cheap,” he says. However, this will bring changes to the market, decreasing buying power for some and keeping those who don’t want to lose their mortgages in their homes longer.
While identifying changes to watch for in the future, neither economist believes that a real estate bubble is on the horizon, and neither expects an economic downturn to the degree of the Great Recession of 2008. Coming from two esteemed economists, that’s a forecast we can all be satisfied with.
If you are interested in market trends and statistics, you may enjoy signing up for Neighborhood News. This is a useful tool to monitor current market activity and trends in your area of interest. Once you subscribe, you will be emailed a monthly report with statistics for the zip code you selected including active listings, sold listings, pending listings, time on market, and price trends.
To sign up, please click here and follow the instructions to subscribe.
Rest assured that you will not receive any spam emails from this subscription. You will receive your initial welcome email and subsequent monthly report.
SEASONAL ACTIVITES IN PORTLAND
Even though the summer has ended, there are still plenty of activities to enjoy in Portland. Here are few recommendations from our team members. We hope you enjoy these activities as much as we do!
Northwest Food & Wine Festival
Saturday, November 10th, 5:00-8:00pm
The NW Food & Wine Festival brings the highest quality regional wines, spirits, beers, foods and prominent chefs and restaurants. It’s designed to present a rich and rewarding experience for wine lovers, gourmet food enthusiasts and industry experts.
Wild Arts Festival
November 17th and 18th
Portland Audubon’s 2018 Wild Arts Festival – the Northwest’s premier show and sale of nature-related art and books at Montgomery Park. All proceeds support the conservation, environmental education and wildlife rehabilitation work of the Portland Audubon Society.
Thanksgiving Cooking Classes
Want to impress your guests this Thanksgiving or try a new recipe? Sur La Table and Portland’s Culinary Workshop are offering Thanksgiving themed cooking classes in November ranging from appetizers to pies and how to brine your turkey or what to do with your leftovers.
Holiday Express Train Ride
The popular Holiday Express Train is stationed at Oaks Park and runs on the Oregon Pacific Railroad tracks along the Willamette River. The 45-minute trip includes hot chocolate, coffee, tea and cider, as well as cookies. Santa will be aboard each train. At dusk, passengers can see the train decorated with lights.
34th Annual Tree Lighting Ceremony
Friday, November 23, 5:30 pm – 6:30 pm
Thousands of Portlanders gather at Pioneer Courthouse Square to celebrate the lighting of the spectacular 75ft Douglas-fir tree provided by Stimson Lumber Company. With over 14,000 colorful lights and Portland’s largest community sing-a-long, this is an event you won’t want to miss!
Holiday Ale Fest
November 28th-December 2nd
Held in the heart of downtown Portland, the Holiday Ale Festival keeps attendees warm and dry under a large clear top tent that covers Pioneer Courthouse Square while allowing for views of the city lights. Gas heaters create a cozy ambience under the boughs of one of the region’s largest decorated Christmas trees. More than 50 winter ales are featured at this year’s event.
SOME OF OUR RECENT SALES
We’d be so glad to talk to you or your friends about our Concierge Real Estate Services and how we can make a difference with any of your upcoming real estate needs.