Portland Real Estate Outlook 2011

January 10, 2011 21:10

It is difficult to make a prediction about the Portland Real Estate market in 2011 because we do not know how the economy will fare this year.  Unemployment is still high, economic growth is weak, the majority in congress has changed, state and local governments are facing huge deficits, the national debt is at an all time high, and there does not seem to be an end in sight for foreclosures and short sales.  I am not going to fill up this post with statistics and graphs.  I am going to make some observations about the market on a more personal and anecdotal level.

Currently, I am involved in about 6 real estate transactions, and all of them are non-traditional sales.  When I say non-traditional sales, I am referring to short sales, auctions, bank owned properties (REO's) or lease options.  In 2010, many of the transactions that I closed were non-traditional.  There has been a downward spiral in prices since the local peak in 2007 that has been fed by distressed sales. 

In 2010, we had a few months where things were looking better, partially due to the tax credit that brought a sense of urgency to the market, and partly due to pent up demand for homes.  Some people have been waiting for the bottom form before getting back into the market, and in the summer of 2010, to some people, it looked like a bottom was forming, so they decided to buy. The good news is that the rate of depreciation slowed significantly is 2010.

There are a few likely scenarios for 2011.  We might have a double dip recession, and if this happens, we would expect real estate values to decline.  The economy might improve on a national level in 2011, and real estate values might stabilize and even appreciate a little.  We might see some inflation in 2011, and property values might get caught up in an inflationary wave; they might rise if real estate is seen as a safe haven.  Interest rates might rise significantly in 2011, and that would put downward pressure on real estate values.

In some parts of the country, real estate values have stabilized quite a bit, and in some parts of California real estate values appreciated in 2010.  Portland was late to come to the real estate crash party, so it stands to reason that we will be among the last to leave.  If we are a year behind our neighbor California, then 2011 might not be so bad.

The positive side of buying real estate right now is: affordability is high, you can get a lot for your money (payment) and bargains abound for investors.  I am working with investors right now who are able to "flip" properties right now by buying low, fixing up the house, and selling at market value.  For people who have steady employment and income, it is a good time to lock in low interest rates on houses that have dropped significantly in value.  For long term investors, there are opportunities to buy rental property that will cash flow positive with the required down payment.  Now is not the time to buy if you are a speculator who believes that prices will go up... they might not.

1 Comment

January 11, 2011 22:52
Brian B. Porter said:

Hi Kent, Thanks for you question about properties in NW and SW Portland... In my opinion it is a pretty good time to buy, if you buy in the right area and for the right reasons. The affordability index is very favorable now because prices have come down and interest rates are still low. The second part of this formula might change this year, but I don't expect any large price swings in the immediate future. With regard to Portland Heights, Arlington Heights, Kings Heights, Council Crest, Hillsadale etc., I believe that premium neighborhoods tend to outperform the rest of the market. In the past few years, the premium neighborhoods have not been beat up as much as the suburbs. I have seen houses sell for half of their 2007 market value in Gresham, Oregon City and Happy Valley, but the close in neighborhoods have not taken that much of a hit.

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