5 ways COVID-19 has Affected the Portland Real Estate Market
These days, we have all been wondering how COVID-19 has been influencing the market. We have seen many ups and downs in the stock market and are unsure of how this will affect the real estate market long term. Here in the Portland real estate market, I am starting to see some changes in the Portland real estate market.
No Open Houses:
In the Portland Metro Area, all open houses have ground to a halt. We are not sure when these will open back up. In the meantime, real estate brokers of Oregon have come up with new ways to show a home.
Real Estate agents have been featuring homes using “Virtual Open Houses” where they walk through the house recording the home. This video is then uploaded onto YouTube and promoted as a “Virtual Open House.” You can see an example of one here
Why does this matter? Most homes are not sold by open houses but many buyers who might not have been interested before may become more interested when speaking with an agent they meet at an open house. There may be fewer buyers “convinced” to make the leap into homeownership.
Comparing the number of houses sold from 2019 Jan-April to 2020 Jan-April we can see that 2020 was looking to be better than in 2019. That all changed when, starting in March, the Portland real estate market slowed down and by April it took a huge hit.
How big is the hit? In April 2020 there were 37% less sold homes than in April 2019.
|Sold Listing||2019||2020||% Change|
Real estate brokers measure the inventory of homes in months. What this means is that if we stopped adding new homes onto the market right now, we would sell out of the available inventory of homes in that many months. For example, a score of 1.7 means that we would sell out of homes in 1.7 months if we stopped adding homes onto the market.
A “healthy” market has about 6 months of inventory. The Portland real estate market has been so hot over the last 8 years that we have not seen an inventory of 6 months since February of 2012 when we had 6.5 months of inventory available. The term “healthy” means that it’s not a buyers market or seller’s market and things are moving smoothly. In a market with less than 6 months, it becomes a seller’s market. If there are more than 6 months, it becomes a buyer’s market.
Looking at the current market, our inventory is low. This is to be expected. Portland has been a seller’s market since 2012. The interesting data though lies in 2020 numbers and the trends of the last three years. We have never had a higher inventory in April than in January. Until now.
The RMLS has been keeping track of inventory numbers since 1999. There has never been a time that the Portland real estate market has had more inventory in April than in January. This is the first year on record.
|Inventory in Months||2017||2018||2019||2020|
Falling Mortgage Rates
Mortgage rates are the lowest they have ever been. The lower a mortgage rate goes, the cheaper it is to borrow money. When the mortgage rate and inflation rate are the same you are essentially borrowing money for free. Your income will go up at the same rate as your interest rate.
Why is the mortgage rate so low? I believe this is how the feds are trying to keep the real estate market from crashing. The hope is people will remain enticed to continue purchasing homes.
Prices Being Affected?
The last thing I’m watching is listing price vs. selling price. These numbers are known as the Sold Price (SP) and the Original List Price (OLP). When there is a lack of demand the difference between the two is greater. Inventory and demand increase in the spring and summer months and decrease in the winter months.
I suspect that we will not see a dramatic decrease in prices for a few more months. That’s if things continue on this trend. The reason prices will wait to drop is that the people selling their homes chose to sell their homes months ago and are emotionally invested in a price. If the Portland real estate market continues to go down, in a few more months the only people listing their homes will be those that really need to get out of them.
When you need to leave your home, you are willing to accept less for it. As there is more inventory now than there was in January, we might be seeing the beginning of a trend. This trend will increase the number of homes on the market and decrease the number of buyers. When the number of buyers becomes scarce sellers are willing to take less.
Looking at the data below, we see that in January the SP/OLP difference was greater than later months. This changes in May.
As we can see, the difference is greater in January, which is somewhat expected. In December of 2019, it was 96.51%. Then as things start to heat up the SP/OLP difference begins to fade. By April we see those two numbers get very close giving us almost 99% SP/OLP. Then May 1-May 4 that number has already gone down substantially.
Depending on how things shape up with regards to COVID-19 and the economy, we may see these things turn around. I plan to continue to watch these numbers and report on them as time goes on.
Why is it important that you have a real estate broker that knows and understands these numbers? The more your broker knows, the better they can act on your behalf. When buying or selling a home, being well informed of the current state of the market is crucial to your financial security and keeps you ahead of the curve.
If you’re interested in buying or selling a home in the Portland real estate market, I am certainly happy to help you. You can contact me through this website or email me at firstname.lastname@example.org
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