Portland Metro Housing Overview

OFFICE OF ECONOMIC ANALYSIS

Portland Metro Housing OverviewCurrent State of the Market and Outlook

November, 2014 Oregon Office of Economic Analysis

Josh Lehner

1


Overview

• Current Housing Market• Availability and Affordability

• Supply and Demand• Demographics, Economy, Household Formation

• Ownership vs Rental

• New Construction vs Existing Stock

• Credit Availability for Households and Developers

• Outlook• Population, New Construction and Prices

2


State of the Market

3


Rising Prices Due To Growing Demand and Low Supply

Ownership Rental

4

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

-

1,000

2,000

3,000

4,000

5,000

6,000

Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

Portland MSA Housing MarketRMLS Market Action Reports, 12 MMA

New Lisings Closed Sales Median Price (rhs)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0%

1%

2%

3%

4%

5%

6%

7%

2007 2009 2011 2013

Portland Metro Rental MarketSource: Multifamily NW

Vacancy Rate Avg Rent per Sq Ft


Lower Affordability

Ownership Rental

5

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jan-92 Jan-97 Jan-02 Jan-07 Jan-12

Portland MSA Housing AffordabilityHousing Expense for Buying Median Home Sold as

Share of Median Family Income, Source: OEA

Conventional, 20% Down 5% Down, PMI

Affordability Threshold

0%

5%

10%

15%

20%

25%

30%

1970 1980 1990 2000 2010

Portland MSA RentAverage Rent as Share of Average Household

Income for Renters

1970, 1980, 1990, 2000 Census, 2005-11 ACS, Source: IPUMS-USA. 2012-14 Author Calculations, Source: HUD, Zillow


Ownership Challenges

6

$276k

$334k

$390k

$177k$205k

$249k

$290k

$132k

$285k

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

All Households Families Married-couplefamilies

Nonfamilyhouseholds

RMLS 2014Median Sale

What Can the Typical Household Afford?Home price maximum for median household, based on 30% Housing Cost to

Income Ratio and 4.1% Interest Rate

20% Down 5% Down

Source: 2013 ACS, RMLS, Author's Calculations


Supply and Demand

7


Bubble Impact on Ownership

8

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010

Multnomah County OwnershipShare of Current Ownership by Year Last Sold,

1990-2013

Hypothetical Steady Sales, No Bubble 2013 Actual

0%

20%

40%

60%

80%

100%

1996 2000 2004 2008 2012

Portland Underwater by YearShare of Zip Codes Where Current Prices Are

Higher Than Each Year


Working Down the Bubble Impact

9

Corbett

Fairview

Scappoose

Troutdale

Downtown/Homestead

Sellwood/Brooklyn

St John's

Arlington Heights/Downtown

S Tabor / Powell-Foster

King/Sabin/Woodlawn

Hollywood/Rose City

Overlook / Kenton

Forest Park/ Sauvie Island

Hillsdale / Corbett

25%

27%

29%

31%

33%

35%

37%

39%

41%

43%

2% 3% 4% 5% 6% 7% 8%

Shar

e o

f A

ll H

om

es L

ast

Sold

20

03

-08

Turnover Rate in Past Year (Apr ‘13 – Mar ‘14)

Which Areas are Making Progress?

Fast Sales and High Share

Slow Sales but Low Share Fast Sales but Low Share

Slow Sales and High Share

Gresham, Parkrose, Mill ParkCully, Pleasant Valley, LentsMontavilla / Hazelwood

Hosford-AbernathyMt Tabor / MontavillaEliot/Boise, Hayhurst/SylvanMultnomah/S Burlingame


Also Making Due with What You Have

10

$0

$10

$20

$30

$40

$50

$60

$70

$80

Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15

Mill

ion

sValue of Remodels Near All-Time High

City of Portland Housing Permit Values, 12 Mth Sum

Alterations

Additions

July 2007$107.8 m

Sep 2014$104.6 m

Source: City of Portland, Bureau of Development Services


Household Growth Picking Up

11

-20,000

0

20,000

40,000

60,000

Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

Oregon Household FormationYear-over-Year Change, 12 Month Average


Underbuilding Binding Today

• 1 permit for every 2.3 new residents

• Nationally, overbuilt during housing boom

• Not in PDX• Bust much bigger

than boom

• Supply constrained

12

0.0

0.2

0.4

0.6

0.8

1.0

1980 1990 2000 2010

Housing Permits per Population ChangePortland MSA

Source: Census, Portland State University, State of Washington

Actual 1980-2004 Average

1983 data omitted due to population loss


Shift into Rental and Multifamily

13

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

1980 1990 2000 2010

Renter Share of Oregon Population

1990s Average

0%

10%

20%

30%

40%

50%

60%

1960 1970 1980 1990 2000 2010

Multifamily Housing PermitsShare of Total, 3 Yr Avg

Portland MSA United States


Credit Constraints?

Demand Side Supply Side

14

700

710

720

730

740

750

760

770

2001 2003 2005 2007 2009 2011 2013

Average Credit Score for Single Family Mortgage

Freddie Mac Fannie Mae

-20

-10

0

10

20

30

40

Net Demand Net Tightening Standards

Senior Loan Officer Survey2014q1-q3 Average, Federal Reserve

C&I Large C&I Small Const & Land Dev Multifamily


Down Payment Issues vs Supply

20% Down Payment 5% Down, PMI

15

0%

5%

10%

15%

20%

Household Income

Distribution of Income and For Sale Inventory in the Portland MSA Market

Assumes 20% Down, 4.1% Interest Rate, 30% Housing Cost to Income Ratio

Family Households Nonfamily Households Inventory


0%

5%

10%

15%

20%

25%

Household Income

Distribution of Income and For Sale Inventory in the Portland MSA Market

Assumes 5% Down, 4.1% Interest Rate, 30% Payment to Income Ratio & PMI

Family Households Nonfamily Households Inventory


Inventory based on October, 2014 snapshot from RMLS of individual properties currently listed for sale


Rents Rising and New Apartments are at the Top End

$/SqFt Price Income

Studio $1.88 $914 $36,560

1 Bd $1.32 $898 $35,920

2 Bd $1.01 $957 $38,267

3 Bd $0.96 $1,118 $44,732

Overall $1.16 $983 $39,332

16

List Price Income

$1,300 - $1,400 $54,000

$1,400 - $1,600 $60,000

$2,300 - $2,500 $96,000

Portland Market OverallMultifamily NW, Spring 2014

New DevelopmentExample

Income needed to keep rental prices at an affordable 30% of income

Median Renter Household: $38,199


The Young and the Restless…

17

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0 10 20 30 40 50 60 70 80

Population by Age, 2015Source: Census, Oregon Office of Economic Analysis

Root Setting Years U.S. Oregon ex PDX Portland Metro


…Are Coping, But Getting Better

18

72%

74%

76%

78%

80%

82%

84%

Jan-00 Jan-05 Jan-10 Jan-15

Millennials and Gen Xers With JobsEmployment to Population Ratio, 25-44 Year

Olds, 12 Month Moving Average

U.S.

Oregon

0%

5%

10%

15%

20%

25%

30%

35%

1980 1985 1990 1995 2000 2005 2010

Young Oregonians Living at HomeAges 18-34 Living with Parents or Grandparents

ASEC CPS, 2 Year Average

Bachelor's or More

Not Enrolled in School

Total


Portland in the Middle of the Pack

19

70%

72%

74%

76%

78%

80%

82%

Millennials and Gen Xers with Jobs25-44 Year Olds, Employment to Population Ratio

2013 American Community Survey


Outlook

20


Population

21

0%

1%

2%

3%

-

15,000

30,000

45,000

1980-85 1990-95 2000-05 2010-15 2020-25

Portland Metro Population GrowthAnnual Average for Each 5 Year Period


Portland New Construction

22

0

5,000

10,000

15,000

20,000

25,000

1980 1990 2000 2010 2020

Portland Metro Housing PermitsPopulation Growth Based Forecast

8,900

6,350 7,600

3,800

6,350 5,100

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990-2005 Today Middle

Portland Housing OutlookAnnual Average 2014-2020

Based on Population Growth

Single Family Multifamily

2.5 per HH2.3 per HH


Prices

23

40

60

80

100

120

140

160

180

200

220

1995Q1 2000Q1 2005Q1 2010Q1 2015Q1 2020Q1

Oregon Home Price IndexFHFA, 2000 Average = 100

Forecast-->

Inflation Adjusted


Summary

• Population and household formation picking up

• Underbuilding during bust constraining today

• Prices no longer cheap

• Consumer preference & affordability key

24


Contact

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Economy & Finance

Portland Metro Housing Overview