Inflated Local Rents, Drive the Purchase Market

As we move into the spring season our local market is primed to out perform the national market due largely to our puffed up rental market. a recent article in the Columbian newspaper showed that average Vancouver, WA 2 bedroom apartment rents were on par with Seattle and noticeably higher than neighboring Portland, OR. What is odd about this factoid, is that both Portland and Seattle have significantly higher median home prices than Vancouver.

Renting in Portland is far less expensive than buying, but in Vancouver it is actually cheaper to BUY than rent and that is rather anomalous for this region. This may be a fleeting moment however as a massive construction boom is underway with more than 7,000 new apartment units scheduled to come online over the next 12-18 months in Vancouver. Portland had a massive construction boom as well bringing some 20,000 units online recently or in the near future.

Over the last 5 years national trends among the millennials was to rent rather than buy and in fact that generation of Americans has had the lowest rate of home ownership in the post war era. That trend seems to be reversing and new reports show millennials are jumping in to the real estate market at rates not seen before.

I still believe 2019 will have modest growth rather than the robust seller's market conditions of 2016 through mid 2018. All things considered, millennials have market making potential just in their shear numbers. They represent 80 million Americans and are now reaching there prime earning years, the next several years should bring reasonable housing demand, but builders need to get ready to change their direction. The trend locally in new construction has been aimed at retiring baby boomers with one level homes. Other builders are still focused on large expensive homes as well and data suggests millennial buyers are not interested in 5 bedroom houses. This younger segment is having fewer children and is driving a bit of an urbanism movement.

Millennials are interested in modern design, energy efficiency and good use of space. The market is healthy and remains mostly neutral with a slight advantage to sellers in the 120% of median an lower market. Sellers of more expensive homes are at a slight disadvantage. 

Market Nearing Neutrality

Our market continues to see new inventory and this is softening the seller's advantage across a variety of price ranges. Even the median price range is offering a larger selection for buyers. Locally it is only the sub-median that remains a strong sellers market, but I am seeing some resistance to high prices even in that tight market.

Pressure in the Vancouver market is still largely external. Portland, OR is still a bit tighter on inventory and is seeing price pressure upwards albeit at a slower pace. Many would be Portland buyers are looking at Vancouver as a nearby alternative. Vancouver has a variety of neighborhood styles, many that resemble popular Portland neighborhoods.

Clark County also offers up a bit of suburbia as well as a bit of country living which is all but Absent in Multnomah County.

The external market forces are keeping Vancouver and Clark County on a modest pathway in median home price appreciation but things are relatively flat compared to the steep spike of a the last few years.

Many projections are flying about from the usual suspects about growth in pricing locally and many have revised things to a much more sustainable 3%-4% for the next year. Clark County continues to add new construction units in both the rental and sales inventory. Vancouver is adding thousands of units across the entire rental spectrum from luxury riverfront apartment properties at $5000 a month to more modest properties with income restrictions in the sub-$1000 range.

Some analysts are a bit concerned about the Millennial age group as that demographic seems more likely to prefer renting than owning and that is a new twist in America's age old "dream." This coupled with increasing inventory could soften the market even more for 2019 possibly throwing us into a full neutral sales condition in the first half of next year.

Business insider had a detailed article about Millennial home buying here. 

Relocating? Rent for a few months first?

Many people find themselves involved in a real estate relocation. Perhaps a job change, promotion, or family related issues. In these situations there are times when the relocation is to an area that is unfamiliar and far away. It can be very difficult to gauge neighborhoods and services in the short visits as buyers look for a new home.

It may serve buyers well to rent a home or apartment for six months to a year keeping the bulk of their items in storage while they learn the area. An advantage to renting is mobility. Once you are ready to move, you give notice, pack up, and leave. Selling a home however is a more enduring process. I believe that it is wise to carefully evaluate the schools, shopping, proximity to work, neighborhood condition and lifestyle, before buying a home. This may take several months to really understand.

Many people however, may be like me. I hate moving. If this is the case, then it becomes paramount for the buyer to consult a true buyer's agent. Many real estate agents don't like showing homes and dealing with the buyer's side of a real estate transaction. Ironically, they are often the first type of agent a prospective buyer meets. The buyer is sitting out in front of a house with the 'Acme Real Estate' company sign and the call the number. That agent may be the classic 'listing' agent.

If buyers are relocating to a 'strange new world' it is advised that they interview a few agents and find one that is willing to spend some time working with them, showing multiple homes in a variety of neighborhoods best suited to their needs. In the end this helps to ensure that best possible purchase and the highest chance of many happy years in their new home.