'I'm done with Oregon' - real estate agents reflect on suburban housing market
The social and political winds of our current moment seem to be seeping into the suburban real estate market — at least according to local agents and brokers.
These representatives have seen an unusually high number of Portlanders flock to cities like Lake Oswego, West Linn and Wilsonville — possibly to escape social unrest and homelessness in the city — and some in the area are so unhappy with the local political environment that they are moving out of state. While the market seems to have cooled a bit, these agents are having record years due to sky-high demand and prices.
Here's a rundown of the current real estate market from those who live it every day.
Darren Piper, a real estate broker for Green Group Real Estate, noted a seminal moment in the planned Villebois community in Wilsonville: the sale of the first $1 million home. While the community has a varied mix of housing types, some homes are spacious, and the inflated market and competitive bidding brought prices to their zenith.
Piper said identical homes that five years ago sold for around $250,000 are selling for over $500,000 now.
"The fact that a home went over $1 million in a neighborhood where these houses were maxing out at six, seven (hundred thousand), is proof of the incredible gains in real estate equity," Piper said.
In Lake Oswego, the market may be even more bullish. Justin Harnish with Harnish Properties counted 26 sales of homes sold for over $3 million in 2021. That's compared to 30 from 2016 to 2020 combined. He also noted that virtually all of the highest-priced homes used to be along Oswego Lake, but a third of the $3 million-plus sales this year sit elsewhere.
"That's very different from how this market used to operate," Harnish said.
Terry Sprague with CEO Luxe Christie's International Real Estate said he recently managed the sale of a $3.8 million home to a client who wanted to live on the lake but the price level was too high. The client decided to buy a home off of Oswego Golf Club instead and Sprague arranged for them to get a boat slip for access to the lake.
"It gave them the architectural and lifestyle benefits they were looking for and that house came with access to the lake," Sprague said.
Sprague said he hasn't had a day off in 15 months due in part to the market conditions, while Harnish already has shattered his record for home sales in a year.
"This has been a pretty incredible bullish run," Harnish said. "I've never seen anything like it."
Explanations for the surge are manifold. Some say the Federal Reserve choosing to buy mortgage-backed securities and other bonds and its general tact of maintaining low interest rates has been a factor.
According to a post by Harvard University's Joint Center for Housing Studies, an abnormally low supply of houses available, low interest rates and an increase in the number of second homes purchased were among the causes for price spikes nationwide. John DeCosta with DeCosta Properties added that potential sellers feeling reluctant to put their home on the market during the pandemic may have contributed to a lower supply and in turn more competitive bidding for the few homes that were available.
Then there are the cultural factors induced by lockdowns — people had the chance to reflect and reconsider what they wanted out of life. For many, the stimulus checks and lifestyle choices led to higher savings and opportunity.
"I've been doing this for 21 years and people say Lake Oswego is pricing itself out of the younger generation," Harnnish said. "This community has gotten a lot younger. People are making more money. People are saving more money. The average sale in LO is still in the affordability range. … It's an expensive area, bottom line, but I'm looking at the stages of people moving in here; it is younger."
In Villebois, Piper said a lower supply of available homes due to the neighborhood nearing full buildout is a factor in the rising prices. And he said people are realizing the benefits of the community.
"For the most part, the new construction homes we had in Villebois were the least expensive in the Portland metro area by far," he said. "It was a local secret these houses were so affordable. The market has caught up to that fact."
DeCosta noted the low supply of housing in the Portland area as a factor. The state is considered to be in a housing crisis due to the shortage.
Some brokers don't view the inflated market as sustainable long term, while others are more optimistic.
"The question some people have is, is this market going to burst. … My inclination is no because we're short of houses. The last time the market blew up we had thousands of vacant homes not able to sell. Now there's no vacant homes," DeCosta said.
And the market already has tapered a bit from its absolute highs a few months ago. Homes are still selling, but bidding wars are less frequent and value appreciations less dramatic.
Broker Dwight Schwab referred to the current state as a new equilibrium.
"We're seeing more price reduction come across the MLS (multiple listing service) than we've seen in over a year," he said. "That doesn't mean prices are falling as it does that people need to more accurately price."
Some of Sprague's clients, who were longtime residents of upscale Portland neighborhoods, did not consider moving to a suburban community like Lake Oswego or West Linn until recently. And yet, they made the move and have not regretted it.
Sprague and other brokers say one cause of this change is the environment in Portland. They were fed up with the riots and homelessness and felt their quality of life could improve.
"A lot of people are the 'never Lake Oswegoers.' They're from Laurelhurst, Alameda, Eastmoreland and have always taken pride in their communities. They thought LO was this exclusive, gated, very conservative community," Sprague said. "What's happened is they've moved here and commented to me, 'Wow this is an incredibly welcoming, diverse community that has a village feeling, and it is very friendly and very welcoming. The schools are great, the restaurants … I've joked with people on the east side: All your friends are moving here and so are your restaurants."
Harnish said taxes are another part of the equation. A recently approved Multnomah County tax to fund a tuition-free preschool program means that high-income residents pay some of the highest taxes of anyone in the nation, according to a study by Oregon Business & Industry. This pencils out at a 3% increase in taxes for high-income earners, which soon will increase to 3.8%. Harnish said the vast majority of urban exiters are leaving for this reason.
"For some of these high earners, that is a significant amount of money. And then you add on the disruption in the city and it's like, 'Why am I here?'" he said.
Sprague referred to these dynamics more as practical decisions by families than political.
"Let's not define it as politics," Sprague said. "Let's talk about, would you prefer to live in a place with high taxes or low taxes, a large homeless population that is not being cared for or live in a place where there is less homelessness or for whatever reason there doesn't tend to be a homeless problem?"
He added that while policies are well-intentioned, "What has been experimented with in Multnomah County is not working for some people and their choices — until Multnomah County fixes things — is they are going to look to Clackamas County."
Headed out of state?
Schwab has seen some clients who he has known for decades decide not to move to the suburbs, but to up and leave Oregon entirely. And he said they cite similar reasons — the politics, the unrest downtown and the taxes. Many of them are moving to places like Idaho, Texas and Nevada.
"'I'm done with Oregon.' I've heard that quote so many times," Schwab said. "Boise has been phenomenal. Alaska has been phenomenal. Portland has been OK, but I think Seattle has been relatively better at least within our world. There's no doubt a lot of people have moved to Idaho. I heard their appreciation was over 30%."
Other agents have noticed the same trend. Piper said the flexibility of being able to work from home has led people to move out of urban centers. They're taking advantage of the hot market and buying in less expensive regions.
"Locally here, half the people who are leaving the state are political moves and (half are) cashing in at the top of the market. Sometimes both," he said.
However, that outflow may be counteracted with an inflow of residents — particularly from California. Schwab has heard that many Californians are similarly fed up with issues in their own state and are especially motivated to leave.
"The last few I've had, (it was a) 'We couldn't take it anymore' kind of motivated," he said.
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