If you’re a real estate investor based in Portland, OR, you already know that the Portland housing market has a track record of being one of the best locations for long-term investments. And as 2020 approaches, you probably want to know whether or not it’s still wise to invest in Portland real estate this coming year. A number of reports claim that the housing market in Portland is undergoing some changes which might influence your decision to buy a Portland investment property. But according to the PwC Emerging Trends in Real Estate report – the most highly regarded forecast report – Portland clearly surpasses the threshold requirements for real estate investors and ranks in the 20 best places to invest in real estate in the US for 2020. Here are our Portland real estate market predictions and forecast to give you a better understanding of what to expect when investing in the Portland housing market 2020.
Related: 10 Best Places to Invest in Real Estate in 2020
What’s Driving the Portland Housing Market in 2020?
Before diving into the specific housing market predictions, let’s take a look at factors that are influencing Portland real estate investments in 2020. When looking for the best cities to invest in rental property, investors look at a number of factors. But the two most important ones that you should focus on are high population and employment growth. From a real estate investor’s point of view, these translate into a high demand for housing and rental properties – both of which can be seen in Portland!
#1. Positive Demographic Trends
With a metro population of 2.5 million, Portland is the 2nd largest city in the Pacific Northwest after Seattle. Portland’s population growth rate for the last 10 years has been nearly double the national rate, according to the US Census Bureau. New residents are moving to Portland from all over the country, but especially those fleeing the expensive California housing market. Moreover, the Portland housing market is hot for young adults looking to start families, meaning there’ll be strong demographic momentum in the future.
#2. A Massive Student Market
Portland real estate is also benefiting from a strong student market. There are over three dozen private and public universities within 150 miles of Portland. This includes the University of Oregon and Oregon Institute of Technology which are attracting students hoping to enter the hot tech market. If investing in student housing interests you, Portland is one of the top places to consider. This student market is also contributing to the population growth trend which is boosting demand for housing in Portland (among renters and buyers alike). As a result, this is putting upward pressure on Portland house values and driving Portland house prices up.
#3. Economy and Job Market Growth
Portland’s local economy is in good shape with an unemployment rate of 3.7% which is extremely low. The future population growth should further aid the economy. Because many people are choosing to work in Portland, its job market is expected to experience a 42.4% growth over the next 10 years. This is higher than the US national average growth rate of 33.5% for the same time period. So, historically, Portland’s economy has never been better! Many of the jobs are from the tech sector, but the overall job market is growing rather quickly with a wide range of jobs powering the Portland housing market and economy in 2020.
Portland Housing Market Forecast for 2020
After quickly reviewing the current Portland real estate market trends, now let’s see how these trends are affecting Portland real estate investors. Here are the top housing market predictions you need to know before buying a Portland rental property in 2020.
#1. Portland House Prices Will Decline
For a long time, we’ve been hearing how house prices in major US cities in the Pacific Northwest and West Coast housing market are on fire. As the second-largest city in this region, Portland house prices are indeed well above the national average. According to Mashvisor’s real estate data, the current median property price for Portland homes for sale is $539,186 ($295 price per square foot). But, the first thing investors in the Portland housing market need to realize is that home prices have been slightly declining as of fall 2019. Looking forward, market experts predict that Portland house prices will continue to decline in 2020 as well.
However, this should not lead you to worry about Portland potentially entering a housing bubble in 2020. It’s typical for house prices in hot markets to see small dips after long-term rapid growth. This can be seen as a “correction.” Hence, experts believe that the Portland real estate market is going through a more or less predictable cycle. The Metro area still has all of the fundamentals for a strong housing market. Portland also still leads the nation when it comes to real estate appreciation with an annual rate of 5%. So, our first Portland housing market forecast 2020 is that it’ll experience a normal decline in prices for a short time period, after which they’ll start to rise again.
For Portland real estate investors, we suggest you take advantage of this market trend as soon as possible. Start searching for affordable Portland homes for sale now before prices become unaffordable.
#2. Portland Housing Inventory Is Limited
The main reason why prices in US cities in the Pacific Northwest are expensive is due to the limited supply of properties and fierce competition. Despite the small drop in prices, the Portland housing market forecast 2020 indicates that limited supply will continue to fuel competition. This is because housing inventory will remain tight through the end of 2019 and into 2020. Housing inventory is particularly tight in the starter home price range, which is roughly defined as $200,000 to $300,000 for this market. Moreover, as of August 2019, there’s been about 2.5-months supply of Portland homes for sale according to Redfin. This is slightly below the national average and well below what’s considered a “balanced” real estate market.
In some ways, the Portland housing market is a paradox right now. Typically, when a real estate market has a low level of supply and strong demand for housing, house prices would be steadily climbing. As we’ve mentioned earlier, however, Portland home prices are actually declining. This could be a sign that things are slowly starting to improve in the city. According to the PwC’s Emerging Trends in Real Estate 2020 Report, Portland ranks first in the nation for development/redevelopment opportunities and 16th for homebuilding prospects. This leads to our next housing market prediction for Portland which is: inventory will improve and new supply will emerge. If this housing market forecast comes true, real estate investors will have more new properties to choose from.
Using Mashvisor’s Property Finder, you can find investment properties that meet all of your criteria in a matter of minutes even in a tight market like Portland!
#3. Portland Will Become a Buyers’ Market
One more reason to consider investing in Portland real estate is that it’s no longer a seller’s market. Zillow labels Portland as a cool buyer’s market at the moment, meaning current real estate trends favor buyers more than sellers. Moreover, Redfin characterizes the market as “somewhat competitive” at the moment. Along with a combination of relative affordability, a high appreciation rate, increasing inventory, and high demand for rentals, this makes Portland rental properties profitable real estate investments in 2020.
According to our real estate data and predictive analytics, the Portland housing market has a price to rent ratio of 23 which indicates that renting makes more financial sense for residents. In addition, Portland real estate investors can expect to earn $1,964 in traditional monthly rental income. All these market trends indicate that the city still has all the fundamentals for a strong housing market in 2020. If you’re interested in investing in Portland homes for sale, you should take advantage of these trends and consider buying rental property sooner than later.
#4. Investors Will Continue to Face Airbnb Legal Issues
For many investors, buying a property in a major US city specifically to rent out on Airbnb has become the optimal strategy to make money in real estate. However, many cities began regulating short-term rentals, making it illegal to rent out non-owner occupied rentals. Unfortunately, Portland has been one of those cities since 2014. According to Portland Airbnb laws, only primary residences are allowed to be rented out for less than 30 days. Airbnb hosts must live in the property for 9 months out of the year. If you wish to rent your property while you’re away, there’s a 95-day cap. Plus, hosts must obtain a permit from the city (which must be renewed every 2 years). Portland short-term rentals are also subject to Portland Transient Lodging Tax (6%) and the Multnomah County Transient Lodging Tax (5.5%).
All of this means that Airbnb Portland is NOT a viable investment choice in 2020 for real estate investors. Our Portland housing market forecast excludes any major changes in Airbnb regulations in the near future.
Investors should also avoid buying Airbnb rentals in these 10 Cities with Airbnb Legal Issues in 2020.
#5. Portland Will Not Be in a Housing Market Bubble
Many people are worried that the housing market in Portland has reached its peak and is now in a bubble. They’re also nervous about the possibility of a market crash in the coming year. Experts, however, believe that the Portland housing market cooling down doesn’t necessarily mean a market crash. As mentioned, it’s more of a correction. Portland house prices skyrocketed over the last 6 years or so mainly due to the severe shortage in housing inventory and strong demand from buyers. Naturally, since there were plenty of buyers but not enough homes for sale to meet demand, prices went up. This led to an affordability issue for the typical buyer who couldn’t afford the median price in the Portland housing market. This is why prices in the city have stalled in recent years.
When you look at the US housing market, you’ll realize this is a pattern that’s been happening in many major cities over the past few years. This explains why we’re currently seeing house prices declining in previously hot real estate markets. As a result, we can conclude that there is not a Portland housing market bubble that will pop soon. What we’re seeing now is merely a modest decline in prices following a rapid and unsustainable increase. This is another reason why investing in long-term rental properties in the Portland Oregon housing market is still a smart move.
Related: Is a US Housing Bubble Coming in 2020?
5 Best Neighborhoods in Portland for Real Estate Investing
Now that we’ve established that Portland is a good location for investing in real estate in 2020, you must be wondering where exactly in the city should you buy a rental property. According to Mashvisor’s Rental Property Calculator, here are the 5 best neighborhoods to consider when you invest in Portland real estate:
1. Vernon
- Median Property Price: $658,000
- Price per Square Foot: $250
- Price to Rent Ratio: 25
- Monthly Rental Income: $2,146
- Cash on Cash Return: 2%
2. Portsmouth
- Median Property Price: $372,934
- Price per Square Foot: $271
- Price to Rent Ratio: 17
- Monthly Rental Income: $1,793
- Cash on Cash Return: 2%
3. Eliot
- Median Property Price: $949,550
- Price per Square Foot: $400
- Price to Rent Ratio: 33
- Monthly Rental Income: $2,385
- Cash on Cash Return: 2%
4. Concordia
- Median Property Price: $459,244
- Price per Square Foot: $283
- Price to Rent Ratio: 17
- Monthly Rental Income: $2,198
- Cash on Cash Return: 2%
5. Boise
- Median Property Price: $723,840
- Price per Square Foot: $300
- Price to Rent Ratio:45
- Monthly Rental Income: $2,467
- Cash on Cash Return: 2%
Sign up for Mashvisor to start looking for and analyzing Portland rental properties in your neighborhood of choice in a matter of minutes using real estate data and predictive analytics!