Deciding to rent or buy in Portland has been a challenge in recent years as the real estate market has started to slow down. While buying a home allows you to start building wealth that you can pass on for generations, it seems out of reach for some Portland residents. With the help of an experienced local agent, you can navigate the market of rentals and homes for sale.
What Drives Decision-Making?
When deciding between renting and buying a home in Portland, there are several driving factors that motivate people. The most obvious one is financial. While some people need more privacy, space for kids or pets, or want to move to a rural area where rentals are scarce, what motivates most Portlanders is price.
When you rent, you build up no equity at all. If you send your landlord $1,000 every month, you have nothing to really show for it. When you send $1,000 to a financial institution for your mortgage, that builds up what you own over time.
As homeowners build equity, they get the side effect of other financial options. Small business owners can take out loans based on the value of their home and borrow against it. If major repairs are necessary, homes can be refinanced to unlock more lending capability.
Renting offers some flexibility for the most nomadic among us. If you don’t think you’ll be in Portland for more than a few years, you should consider the stress of trying to rent out your home or trying to turn it around on the market so quickly. Then again, some people don’t like the stress of owning.
However, home values have a tendency to go up. So does rent. Rent increases take money out of your pocket while home values going up puts money into it unless you move.
Average Price to Rent vs. Buy in Portland
The average price to rent in Portland has gone up a lot in recent years according to RENTCafe data. As of now, about 10% of renters pay between $500 and $1,000. Nearly 80% fall between $1,000 and $2,000 a month depending on the neighborhood.
In a neighborhood like Parkrose Heights, you’ll find rent hovers around the $975 mark, which is lower than in many other American cities. However, if you’re in Nob Hill, you’ll find rent nearly doubles, at more than $1,800 per month. This region cost considerably more than the Portland average but sets a bar for where rents could end up.
If you’d prefer to buy in Portland, you’ll find median home values at $425,500 according to Zillow data. Buying in Parkrose Heights, you’ll find the median value is in the $330,000 range. Nob Hill has many more million-dollar homes.
Portland’s Housing Market Outlook
Portland is seeing a bit of a slowdown in 2019. This comes earlier than when many housing experts though after predicting another housing recession in 2020.
The highest-priced units on the market are the ones that are dropping the most right now. Condos priced over $300,000 and homes priced over $600,000 are experiencing the greatest slippage.
Lower priced homes have a greater chance of appreciating. As fewer mega-wealthy investors are buying homes in Portland, the need for median-valued homes is going to continue.
Portland’s population growth once was the highest in the nation but has fallen precipitously as it becomes more expensive than many other American cities. As the nation’s market cools, so will the higher end of the Portland housing market, so if you’re looking to invest now, buy lower or invest in a fixer-upper.
The Real Cost of Owning a Home in Portland
The first thing to consider when investing in a home is figuring out how you’re going to pay for it. While lower-income home buyers might think they have to seek out high-interest private lending, there are some state programs to help out.
The Oregon Housing and Community Services agency issues bonds to help households get their first home. With the 30-year fixed rate in Portland sitting at 4.372% in mid-2019, the OHCS provides below-market lending rates to keep payments affordable. Borrowers can get an additional 3% of cash assistance with the Cash Advantage program, while the Rate Advantage program offers the lowest interest rate possible.
When calculating how much you can afford, take your income after taxes (or net) and multiply them by 35%. That’s the maximum amount you should spend on housing and in some cases all that lenders will provide you with.
You also need to have cash set aside for your down payment. If you can’t afford at least 20% of the cost of the home up front, you’ll be saddled with a high-interest loan. You’ll need at least another 3% on top of your home’s price to cover closing costs as well.
Then you’ll have to consider how much you’re going to be able to handle when it comes to utilities. Portland gets chilly in the winter, so if you’re buying a large place with little insulation, you can expect to pay high utility bills. In Portland, you’ll have to pay for basics like trash pickup and water, so make sure you set up all of your utilities in advance.
Don’t Navigate the Market Alone
Finding the right home in Portland for you and your family shouldn’t be something you do alone. When navigating the real estate market, you need the help of an experienced local agent who knows the way the wind blows and where the best deals are. They’ll make sure that you time your purchase right and end up in a home that’s perfect for you.
Contact us today to get connected with a Clever Partner Agent who can put you in a home that helps you meet your financial and family goals for the future.