PORTLAND HOUSING 3Q17: Oversupply and High Prices Combine to Stall the Market

  • Quarterly New Home Starts are down 16% YoY; we expect home sales to end the year down 10% from 2016 levels.
  • Oversupply is starting to be an issue as we are consistently starting more homes than are sold in this market.
  • Pricing reached its peak at the end of 2016 for most of Portland Metro; the more prices are pushed upward the slower sales will become.
  • We see a lot of concern about the impact of the Trump Administration’s planned changes in the mortgage interest deduction, but we estimate this would have no impact on 71% of the home buyers in the Pacific Northwest.

Metrostudy’s 3Q17 survey of the Portland housing market shows that new home starts are down 16% over 3Q16, but we continue to see starts outpace the number of sales. In the third quarter we had 711 single family home sales and 1007 new home starts. In the last 5 quarters we have started 5,271 homes and sold 4,369.

“While we are not currently over supplied to a point of concern, the fact that we are consistently outpacing sales with starts is and will need to be addressed,” said Todd Britsch, Regional Director of Metrostudy’s Portland office. “Four months supply is the high end of my comfort zone for unsold spec inventory.”

Detached sales will fall very close to forecasted numbers of 3,500 home sales for 2017 which down almost 10% from 2016. The attached I thought would make up the difference but builders are taking too long to bring inventory to market, thus 2017 will end in a virtual tie with 2016 attached housing sales.

Clark County’s median detached list price took the largest leap during the year of 18% in the 3rd quarter compared to last year at this time. Pricing reached its peak at the end of 2016 for most of Portland Metro. The more prices are pushed upward the slower sales will become. We have seen 6 consecutive quarters of declining sales volumes yet starts and prices continue to way outpace sales.

Based on the trailing 12 months of sales we have a 13 month supply of vacant lots on the market today and a 4 month supply of unsold spec Inventory which means the market is neither over or under supplied. Welcome to a normalized market let hope we treat it that way.

“We are seeing a lot of concern about
the new proposed tax
code changes made by
the Trump administration, specifically the
mortgage deduction change to $500k,” said Britsch. “My rough estimate is that it would
not impact 71% of the
market in the Pacific
Northwest. 15% of the
market could see a tax increase of anywhere from $1 to $999. 4% could see a $1000 to $1999 increase and another 4% could see $2000 to $18,000. To be honest I don’t think it will go through as the Senate already change the mortgage deduction back to a million, but negotiations continue.”

For information contact
Todd Britsch – tbritsch@metrostudy.com
Tel: 425-953-4714

About Metrostudy:  Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

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