The average home price in the Portland Metro was flat in August. Inventory fell to 3.5 months as the housing market is starting to tighten. I’ve gotten nine properties into escrow since mortgage rates started falling 6 weeks ago. Thankfully, I won all three bidding wars my buyers participated in this month. However, 90% of listings are not resulting in bidding wars so there is plenty of room to negotiate with most sellers. There are just under 7,000 listings for sale in the Portland Metro as a whole. I expect this number to continue to fall.
The market is tightening and moving in the opposite direction of what the seasonality of the housing market would normally show. Typically home prices gradually drop in the fall and winter but there can be outside factors that stop or reverse this trend. This happened in October 2021. That fall, the conventional loan limit jumped to $647,200 which allowed buyers to put as little as 5% down on houses in the $600,000-$700,000 range for the first time ever. I was involved in seven bidding wars that October. This illustrates how outside factors can influence the market even during times when it’s supposed to weaken. We didn’t see normal levels of demand from buyers during the spring so it would make sense there is pent up demand for houses as mortgage rates fall. I expect more buyers to come into the market with every drop in mortgage rates. The coastal housing market turned considerably in August. The inventory on the northern coast fell from 7.4 months to 5.7 months with the average home price jumping almost 7% month over month. While this is a notable shift, monthly price changes tend to be in greater amplitude on the coast since there are far less sales each month compared to the Portland Metro. Still, there are signs every housing market in Oregon is tightening right now.
The 30 year fixed rate averaged 6.26% across the United States last week. Mortgage rates will likely drop further in the coming months as more rate cuts are priced in. The slowdown in the labor market is the culprit. The U.S. economy added only 22,000 jobs in August versus the market expectation of 70,000 jobs prior to the report. While job growth in July was revised upwards to show a gain of 79,000, job growth in June was revised downwards by 27,000 jobs. It turns out that the U.S. economy lost 14,000 jobs in June. This was the first time we have seen job losses since 2020. The slowing labor market will likely pressure the Fed Board of Governors into multiple rate cuts in the coming months. On September 17th, the Fed cut the benchmark lending rate by 0.25%. That cut was already reflected in current mortgage rates. How many cuts occur will ultimately determine where mortgage rates settle in 2026. The Federal Reserve issued a dot plot showing the consensus estimate is for two more 0.25% cuts in 2026. Two months ago I wrote that big revisions to the monthly job growth numbers were coming while no one was talking about it. At the time, I couldn’t even find the data except when I combined labor market statistics from several different sources. The next two reports were big surprises with huge downward revisions in U.S. job growth. That is now fundamentally reshaping what is happening in the housing market since the labor market is driving down mortgage rates. My next prediction is home prices are going to stay firm this fall as mortgage rates stay down. The average home price in Portland is only $30,000 below all-time highs. With firm home prices in the winter, it is highly likely the average home price will set new all-time highs in 2026.
Outside of promoting maximum employment, the other mandate of the Federal Reserve is to maintain stable prices. The rate of inflation continues to reaccelerate with the Consumer Price Index (CPI) increasing 2.9% in August. Core CPI, which excludes food and energy, rose 3.1% year over year. Tariffs are leading to price increases and that is being felt by consumers. However, the economy slowing is also counteracting some of pricing pressures so not everything is pointing to inflation running too hard while rates still remain elevated. If the Federal Reserve cuts the benchmark lending rate too aggressively, there are scenarios where housing and many other items could increase substantially in value in 2026. If you look at the price of gold, which continues to hit all-time highs, that is an indication of foreign central banks being worried about the spending power of the U.S. dollar. A 10-14% increase in home prices in Portland has occurred between January and July each of the last 4 years. If prices stay firm this fall, we could be at record home prices by April next year. I suspect 2026 is going to be the strongest spring market for housing since 2022.
I am in contract on four properties that have large remodels planned right now. I always talk about the finance side of things but one of the main reasons I went into real estate was design. I have consulted on well over 30 remodels at this stage and help clients do everything from choosing finishes to envisioning different floor plans. My family used to do remodels and has been very successful in real estate speculation. I started helping design kitchens and bathrooms at the age of 13. I also have connections that help clients secure certain types of building materials, such as flooring, at builder pricing. One thing that drives my ability to do this is having access to great contractors. Gabe Moroshan with Top Construction LLC has been invaluable in helping with remodeling and repairs. He bids on most properties I represent buyers on to help quantify repair costs. Gabe has done most of the remodels I have overseen in the last few years. If you have any interest in acquiring a property that you want to change to match a certain vision, we can help. I also help sellers target updates with the highest return on investment when they sell. That has been an incredibly successful strategy to sell listings over my career.
