Cooling Off

We've been getting record heat all across the country in the month of July. The real estate market in Portland, like many other places around the country, is showing some initial signs of a cool off.

According to the June real estate statistics, we're still seeing phenomenal growth (17% average) in terms of sold prices, available inventory is on the rise 3 months in a row. That indicates that our market is beginning to turn in favor of the buyers. Is it a buyer's market yet? Well, not quite but we'll slowly get there.

For homes in the under $500,000 range, they're still moving relatively fast. We're still seeing competing and multiple offers. Those above this mark, things are really taking a slower turn. What used to sell (e.g. in the West Lake neighborhood in Lake Oswego) within 2 weeks last year has been sitting on the market for over 2 months. Partly, that's because sellers are still expecting the same kind of growth rate at 17%. So they inflated the asking price by a large margin. Guess what? Few takers. Interest rates has gone up by a whole percentage point. That means: for every $100,000 we borrow, we have to pay about $100 more a month. So a $500,000 loan is $500 more. That certainly enough to make some people turn to either lower priced housing or a different area altogether if they want to maintain a certain level of life style.

Investors are also taking a much more cautious approach. The days when they could simply close their eyes and throw the dart and they'd make money are gone.

In a way, the market cooling is a healthy sign. Real estate in the last 2 years had been growing at a dangerous rate, making housing unaffordable. Not that I want to see home prices go down. But too much growth at too fast a rate is certainly bad news. You remember the old saying: "the higher you climb, the harder you fall". This certainly could be the case in the market.