Portland Home Prices Soar in May, Defying Steep Rise in Mortgage Rates

Limited supply is keeping prices high even as the Federal Reserve pulls the punch bowl.

Dead end, Rocky Butte. (Brian Burk)

Home prices in Portland jumped 11.7% to a median of $575,000 in May, up from $515,000 a year ago, according to RMLS, as tight supply offset rising interest rates, which tend to cool real estate markets by making monthly payments higher.

“Total market time,” the length of time between when a property is listed and when an offer is accepted, fell to 18 days in May from 21 days in April and 22 days in May 2021.

“We’re in a very strong seller’s market,” said Aryne Blumklotz, principal real estate broker at Living Room Realty. “There’s not much to buy.”

Blumklotz recently represented a seller in the Alberta neighborhood who got nine offers on a house that listed for $675,000. She held three open houses, all of them packed. The house hasn’t closed yet, so she can’t reveal the winning bid. A few weeks before, she sold a house in Alameda for $995,000 that had listed for $869,000.

Even so, there are signs that the market might soften. Blumklotz says she’s getting more emails from other agents about homeowners who are lowering prices. That’s most likely because of the rise in mortgage rates, she says.

“Most buyers are shopping for a monthly payment,” Blumklotz says. When rates were low, those people could stretch to borrow more money and still hit their target payment. “Now, those people can’t stretch,” Blumklotz says.

The U.S. Federal Reserve is raising interest rates at the fastest pace in decades to try and tame raging inflation. Higher interest rates make it more expensive to borrow money, cooling demand for goods, especially big-ticket items likes homes.

Related: We asked a financial adviser: Should you break the bank on big purchases, or hold out?

When the Fed raises rates, economists talk about how the central bank is taking away the punch bowl. The term came into use in 1955 after Fed Chairman William McChesney Martin gave a speech at the Waldorf Astoria Hotel and compared the central bank to “a chaperone who has ordered the punch bowl removed just when the party was really warming up.”

The average rate on a 30-year fixed mortgage is about 5.23% today, according to the St. Louis branch of the Federal Reserve, up from 3.11% in January.

Maybe grab another glass of punch before the bowl disappears.

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