Although the housing market in Portland remained strong in Q2, with demand returning to pre-pandemic levels following another hike in interest rates by The Fed, the market showed signs of a cooldown in Q3. After median prices of homes in Portland rose to their zenith in Q2, by contrast, Q3 marked an adjustment in the median sales price, with many homes spending more time sitting on the market and fewer houses being sold. This has caused sellers to adjust prices to attract potential buyers.
While it is typical for the housing market to slow down towards the final quarter, other factors, such as inflation, are at play that are affecting the market. This has led to a shift in the market from the previous quarter and has implications for the market’s future and for buyers and sellers.
Median Sold Price
Unlike last year, where the numbers for the housing market remained steady throughout the busiest quarters, Q3 of 2022 marked a change towards a more stable state for the market. The median sold price in Portland for Q3 fell to $590,000—a decrease of 3.3 percent from Q2 of this year. While this indicates a small drop in demand, it is still a rise of 7.3 percent from Q3 in 2021—which means that the housing market in Portland has grown since last year.
While demand for homes in Portland is not as high as it was in the last quarter — a result of the steadily rising interest rates as The Federal Reserve attempts to curb inflation — sellers who price their homes reasonably will still be able to sell quickly. This is mainly because there is always demand for homes, even in a shifting market.
Number of Homes Sold
While Q2 saw a sharp rise in the number of houses sold at 7,091, Q3 marks a downward fluctuation as demand for homes is returning to stability, with 5,928 houses sold—a 16.4 percent decrease from the previous quarter. This is also a drop from the same time last year, with 8,228 homes sold in Q3 of 2021—a decrease of 28 percent. The decrease in the volume of homes sold from last year, and the previous quarter, indicates a shift in the market.
Although Portland currently remains a seller’s market, it may gradually shift to favor buyers – should demand continue to decrease as inflation and interest rates rise – which could put downward pressure on median sales prices.
Median Days on Market
Unlike the previous quarter, where the median number of days on market for homes in Portland was five days, in Q3, homes listed for sale remained on the market for 11 days. Along with the decrease in median sales price and the number of sales, this increase in median days on market indicates that sellers are having a slightly harder time finding buyers now than they previously were.
Mortgage Rates in Portland
Although housing prices are stabilizing, mortgage rates are not showing signs of falling soon. After keeping interest rates near zero throughout the Covid-19 pandemic, the rapid inflation in its aftermath has prompted The Federal Reserve to hike interest rates to curb it. In September, The Federal Reserve increased interest rates yet again by 75 basis points (0.75%), shooting for a target range of 3 – 3.25 percent. This has led to 30-year fixed mortgages reaching 6.49 percent and 15-year fixed mortgages reaching 5.56 percent as of the time of writing.
While the past year has shown that the effects of the pandemic are beginning to slow and that the housing market is adjusting, the rapid rise of inflation may pose a challenge for buyers and sellers if it continues to rise unabated. For now, experts anticipate that The Fed will continue to hike interest rates throughout the rest of the year and into 2023. Furthermore, they anticipate that it could rise to a base rate of 4.6 percent by 2024 as The Fed attempts to slam the brakes on an economy that appears to be heading into a recession.
All that said, these efforts aim to curb inflation, with The Fed anticipating their interest hikes to work, allowing them to target a base rate between 2.6 – 3.5 percent in 2023. In the meantime, the continued rise of interest rates is a leading factor in the decline of home sales, with many sellers adapting to the drop in demand by adjusting prices in hopes that buyers wary of rising interest rates may purchase a home for the right price.
Future Market Expectations
While there are signs that the effects of the pandemic are ceasing and that the market is returning to normalcy, for the foreseeable future, curbing inflation will remain a key element in the federal government’s economic policy. Should inflation keep rising, The Federal Reserve will likely continue to hike interest rates in response, driving mortgage rates up and demand down.
In either case, both buyers and sellers should continue to monitor the market and consult with their agent to see what options they have and determine the best time to buy or sell.