The outlook for prospective Oregon homebuyers is worse now than at any time since 2007, according to a new report by the Oregon Employment Department.
Why? Damon Runberg, a regional OED economist, gives three reasons in the report he released May 19. First, houses are in very short supply, a shortage that has worsened through the pandemic. In Portland, for instance, the inventory of homes for sale is one-third of what it was in April 2020. The lack of supply, Runberg notes, means higher prices.
Indeed, Zillow shows Oregon home prices jumped more than 10% in the first quarter alone. That’s more than three times the typical increase for a year.
Soaring mortgage interest rates are the second challenge, up to 5.5% from 3% a year ago. “That means that in the past year the average buyer with a mortgage can afford roughly 20% less home while at the same time the price of housing continues to rise,” Runberg writes.
The third factor: inflation. Prices of all goods are going up faster than workers’ paychecks, leaving them less money for mortgage payments. Inflation and a cooling job market have wiped out the wage gains Oregonians saw earlier in the pandemic. “After accounting for the changing costs of goods and services,” Runberg says, “Oregonians were making less money on average than they were a year prior.”
The combination of those three factors leaves Oregonians in a vise, the likes of which they haven’t seen since 2007, right before the real estate bubble burst, plunging the nation into recession.
WW has previously reported on the spike in home prices in Portland’s suburbs and surrounding towns (“You Can’t Afford This,” April 13). But state numbers show that affordability in Hood River and Bend is even lower than in Portland.
Mike Wilkerson, a housing economist at the firm ECONorthwest, which recently completed a 600-page report on housing supply for the Oregon Legislature, says that’s because homes for sale are scarce in the “Zoom towns” where recreational opportunities have attracted telecommuting workers, while housing supply is greater in Portland, where workers also get paid more. Even Medford, by state measurements that compare wages to mortgage payments, is less affordable than Portland.
ECONorthwest’s report, which determined that Oregon has underbuilt by 111,000 housing units over the past two decades, offers a backdrop for the current shortage. The pain is particularly acute now.
“There’s no question, though, that the trend is getting worse every day,” Wilkerson says. “The recent increase in mortgage rates is really driving that.”
This chart above compares home affordability in various Oregon cities: