As Portland's housing market sinks, coastal county prices surge

Towns far from Oregon’s biggest urban area had the hottest housing markets in a recent analysis of home prices over the past five years.

Only one ZIP code from Multnomah, Washington or Clackamas counties, the three that make up the Portland metro area, was included the top 30 markets in the state. Instead, locations on the coast, in wine country and Central Oregon showed the strongest gains in home prices.

A new analysis by American City Business Journals of home price data from Zillow Group Inc. compared markets by home price momentum at short- and long-term intervals. The analysis focused on ZIP codes with median home values of at least $250,000 and a population of at least 5,000.

Nationally, the rankings of the housing ZIP codes for home price momentum were dominated by vacation and second-home markets, with ZIP code 33480 in Palm Beach, Florida; and ZIP code 81657 in Vail, Colorado; leading the way.

Oregon reflected that trend, with coastal towns showing some of the biggest gains. Lincoln City posted a 74% gain in median home value since 2018 while median values in Newport grew by 62%. Scenic towns like Hood River and Astoria also made the list with five-year value increase of 53% and 66%, respectively.

But while all of the top 30 locations showed strong increases in values over the past five years as home sales soared and mortgage rates hit historic lows in the pandemic, the past year sent most into negative territory.

Only three locations showed a rise in median values in the past year, and none had an increase of more than 1%.

Housing market outlook for the remainder of 2023

Nationally, tight supply continues to weigh heavily on the housing market’s trajectory.

According to Zillow Group Inc. (Nasdaq: ZG), total active inventory in June was down 10.4% from a year prior and 44.9% below June 2019 levels. That’s especially significant because the summer months are historically peak buying and selling months, underscoring the abnormal state of the current housing market.

It’s possible people’s attitudes or expectations about home prices have also played into an owner’s willingness to list their home, said Jeff Tucker, a senior economist at Zillow. When the market began to cool last summer and fall, some owners may have perceived it as a bad time to put their homes on the market, Tucker said — especially if they paid at or near the top of the market during the recent run-up in home prices.

“Homeowners stopped selling, to a surprising degree,” Tucker said. “That flow of new listings has been gradually starving the market of that new supply.”

Most housing economists agree that mortgage-rate movement is the key to unlocking not only more buyer demand, but also potentially new supply, as that could motivate existing owners to list their homes if they’ve been waiting to buy a bigger home or move.

Economists aren’t predicting a precipitous drop in mortgage rates, though, especially in the near term. Additionally, any persistent drop in mortgage rates is likely to compel more buyers to enter (or re-enter) the market than sellers to list their homes.

“My hunch is that (mortgage rates) coming down will have as much of a tailwind to demand as it would to supply and, therefore, with falling interest rates, would still on balance crank up the temperature in the industry and boost demand (more) than supply,” Tucker said.

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