This is why I don’t believe we’ll see a housing crash in 2021.
Are we primed for a housing crash in 2021?
To answer that question in full, let’s first recap 2020. Throughout the year, we saw considerable appreciation. In the Portland Metro area, home values hovered around the $475,000 price point, while in Clark and Marion counties, they held steady at $410,000 and $330,000, respectively. Just like home values, sales went up, but the number of homes for sale decreased. After COVID hit, we saw a massive spike in demand and didn’t have enough inventory to meet that demand.
Now, what exactly causes a housing crash? There are a few points to consider. Right now, everyone is talking about affordability. The average income in the Portland Metro area is right around $75,000. Traditionally a homebuyer’s income should comprise about 30% of the average home price, and we’re slightly over 30% at the moment. Unemployment is around 11%, but the majority of that comes from the service industry, which doesn’t account for a large part of the home-buying population. If you remove the service industry from the equation, the unemployment rate drops to around 5% (the pre-COVID rate was around 3%, which is phenomenal). Furthermore, I see our population growth stagnating in 2021.
The great news is, there’s still a ton of demand for homes. According to a recent joint study by Realtor.com and Zillow, 95% of all apartment dwellers claim they want to buy or rent a house. In other words, they want more space, and this desire started after COVID hit. Before that, convenience was more preferred among buyers, but that trend has tapered off since so many restaurants closed.
What do I think will really happen in 2021? First and foremost, I think we’ll continue to see appreciation. While our area should stay in the single digits, the outlying areas of our marketplace should see double-digit appreciation.
Also, I predict more homes will hit the market. In our area, landlords who don’t own many properties (e.g., one to three) are getting out of the game due to factors like rents not being paid, new zoning laws, and higher taxes. If they can get their homes vacant, I foresee them putting them on the market. Additionally, I think we’ll see more home sales, from Multnomah County all the way up to Clark County.
The bottom line is, there will be no housing crash. On the contrary, if you’re a seller, you should get mucho cash. For example, my team and I recently listed six homes on a Thursday. One of those homes received four offers, and that was the home with the fewest offers. The home with the most got 32(!) offers. All of those properties are now pending. In addition to high demand, interest rates will stay below 3%, which will keep affordability reasonable.
Stay tuned for my next video where I’ll talk about the status of buyers in our market. If you have questions about today’s topic or there’s anything else I can help you with, don’t hesitate to reach out to me. I’d love to speak with you.