Vancouver Rental Surge Impacts Market

I have reported recently that the rental market in Portland has dropped dramatically. In fact the once red hot rental market in Portland has cooled to a healthy pace as tens of thousands of new units came online in that city. Now the typical rent for an apartment in Portland is LESS than similar rent in Vancouver. Portland median home prices are still 20-30% HIGHER than Vancouver, yet rents are lower.

Vancouver is also on an apartment building binge and thousands of new rental units are coming online here as well, with many more under construction or planned. Presumably this will soften the rental pricing here as well and that is a welcome change; or is it?

High rents makes owning more attractive. It isn't hard to sell someone on the idea of owning a 'real' house for $1700 a month versus renting a 3 bedroom apartment for the same. Honestly that's just too easy. When rents soften up, it is possible that demand for purchase housing will soften up with it.

There has been much reporting about the trends among millennials to rent rather than buy. Most of the data suggests that mobility is the primary concern. That is fine and well, sure most young people are not certain where they will end up. But the older half of the millennials are now in their 30s. They are settling in to that 'good' job. They are getting married and starting families. That is a stability inducing situation that lends itself to buying a home rather than renting.

Additional data shows that millennials are continuing the trend towards smaller family units having fewer children on average than any previous generation of Americans. Builders are still missing the mark locally producing large 3000 square foot homes with four or five bedrooms for a mass of upcoming families with one kid.

The market is desperate for classic "three 2s" and the builders are not delivering. This is why most of the market is a bit flat with very modest appreciation, but the bottom is still pretty hot with multiple offers on 40 year old 1400 square foot ramblers.

This is a great time to sell your classic ranch house and step up to that larger house or country property if that is your desire since the little rancher will get top dollar and the sellers of larger homes and rural acreage are softened up ready for a discount offer.

 

Market is settling in

I like a more calm and sensible market. When the market is at one extreme or the other, the greedy side of humanity can sometimes rear its ugly head. 6 years ago when the market was down and sellers were desperate, buyers could kick the sellers in teeth with the swagger of an old west outlaw. Then as the market turned into gold the sellers got revenge as the 20016-17 market was difficult for buyers. Sellers tactics were often skirting the fine line of ethics.

Now we see a market that has settled in a bit. Values are still on the rise, but inventory has also risen bit. The median priced home throughout the Portland-Vancouver metro is now barely affordable by the median income earner. This has led to a more sensible market.

We are not in a declining situation but rather the rate of growth is just a little slower. We will probably experience a modest and more "normal" rate of appreciation this next year, perhaps in the 4-6% range. This represents a very healthy and sustainable market. These jack-rabbit hops in prices due tend to create bubbles when they last too long. I am relieved to see than the run up in values has subsided and we are calming the pace to sustainable levels.

Zillow Graph for Vancouver, WA

Buyers should beware however that strong economic conditions in the future could lead to another 'hop' in a year or two. I am not a modern Nostradamus however so who knows what the near future holds. What we do know is that things have indeed settled in and that is actually good for everyone in real estate.

Spring Market Trends

Trends for the $200k-$400k market

The market is just moseying along at a nice comfortable pace. Inventory numbers show a bit of a spike in the middle of the market. The bottom is still hot but the middle is now starting to see solid and promising activity. Between $200,000-$400,000; new listings, pending units, sold units are looking favorably up with a median price running flat since the start of the year. One statistic that is intriguing in this middle market analysis is the price change differential. This indicates how much less than list price homes sold. That is trending down which means more full price or near full price offers are coming in. Once the middle gets some good traction we will see the top of the market begin to swell a bit also.

Trends for the $200k-$400k market

2014 is shaping up to be a healthy market. I do not expect explosive growth like we had in 2013 but I am very optimistic about the overall trends that seem to be forming now.

I have also seen a nice surge in the $275k-$325k new home market with builders offering a little more inventory in that middle upscale market. The move up market can drive both the top and bottom and I feel that it is critical to see positive movement in this area.  Buyers are out there and they seem to be jumping in cautiously but in good numbers.

Buyers also seem to be continuing the trend of spending less than the bank will offer. The mid 2000s saw buyers using every dime of borrowable assets but lately I see a trend to leave some on the table. Caution after a rough market crash that is only five years in the rear view mirror.

This is a great time to list a home and it is still a good time to jump in and buy.