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As Alex and I continue to help buyers navigate the current market, we get a lot of questions on why the market is so skewed towards sellers. Inventory has been historically low in Portland for almost three years. “Months of inventory” is a statistic that divides active listings at the end of a given month by the number of home sales in that month, effectively showing how long it would take for that month’s inventory to sell. 4-6 months of inventory is considered balanced, with anything above that being slanted towards buyers and anything below that slanted towards sellers. The Portland Metro area has been below two months since March of 2015. Home buyers during this time period have experienced the results of this firsthand: multiple offers, homes selling above list price, needing to tour homes the same day they go on the market. While we are seeing these pressures alleviate a little – July through October 2017 were a shade above 2 months inventory before the numbers dipped below 2 in November – inventory is still remarkably low. Why? The following factors are responsible for these conditions:
- The “chicken and egg” problem of prospective sellers also wanting to buy in the Portland market but being loathe to enter the competitive fray of homebuying.
- Long-time homeowners have enjoyed the market’s recent appreciation and have no interest in cashing out. In addition, the Baby Boomer generation is working later into their lives, removing the traditional warm-weather relocation sales.
- Many homeowners have remodeled to fit their needs rather than sell outright and purchase a new home.
- The lack of new construction, stemming from an increase in material costs and the difficulty in procuring buildable land in Portland, means the inventory is dependent on the resale market.
- Increased life expectancy and the aforementioned remodels mean sellers are living in their homes longer.
- Sellers who have purchased at record low interest rates over the last decade are reluctant to give that up.
- Portland’s buyer demand remains extremely high.
Will we see these conditions alleviate any time soon? Inventory is expected to loosen, but only slightly. As prices begin to level off, sellers who are looking for the “right time” to sell may think 2018 is the right time, particularly as rising interest rates begin to shrink their available buyer pool. Other factors may be more difficult to ameliorate. If you do have any questions on how this impacts your specific situation, please don’t hesitate to give us a call or email. We’d be happy to discuss!
