The Word of the Day is correction. What needs correcting, you say? Home prices, which have risen around 15% over the past year. Nobody who has been paying attention ever believed that kind of growth was sustainable, and the Fed certainly saw it as a problem when they made moves that caused a rapid rise in interest rates. Those rate increases- mortgage rates are now about double what they were last year- are starting to do what they were designed to do, which is to calm down the market.
It’s important to note that correction is not a synonym of crash. “Normalizing” is a better synonym. The goal is to get the market back to a place where buyers and sellers are on equal footing, rather than what it’s been like for the last year or so. That could be more aptly described as sellers demanding- and getting- suitcases full of unmarked bills, no questions asked.
The latest monthly data for Portland’s west side does indicate some cooling off:
List prices remained flat with April, while sales price went up $10k (which is about 1.5%). It’s a far cry from where it was a year ago, or even four months ago.
Now here’s where it gets interesting. Digging a little deeper- and looking at even more current data- tells us a slightly different story. Not all parts of the market are moving in the same direction:
Since all housing data is historical I wanted to see as close to right now as I could, since home buying decisions are made in the present and not the past. The median home price over the last 30 days (through June 10) is up 1.84% over the prior 30 days, which lines up close enough with May’s data. However, single family homes were up over 4%, while condos and townhomes were down 2%. That market segment is the first casualty of the interest rate hikes.
Being that I don’t have a crystal ball, I can’t say what it’s all going to look like in a year. Right now though, it’s looking like a great opportunity for those who have thought about downsizing and have enough equity to mitigate the effect of higher interest rates. The demand for single family homes is still strong- not on fire like it was a few months ago, but strong nonetheless. The demand for condos and townhomes is slipping as entry-level buyers get priced out of the market. We’re now in an Econ 101 situation in which someone could sell high and buy low.
I am a licensed real estate broker in the state of Oregon. Data is sourced from RMLS, and all analysis is mine and mine alone. Other opinions may vary. If you would like a free analysis of your specific area, please contact me at eli.cotham@eleetere.com or via the contact page.
