Portland Metro Housing Overview

Portland Metro Housing Overview
OFFICE OF ECONOMIC ANALYSIS
Current State of the Market and Outlook
November, 2014 Oregon Office of Economic Analysis
Josh Lehner
1

Overview
• Current Housing Market
• Availability and Affordability
• Supply and Demand
• Demographics, Economy, Household Formation
• Ownership vs Rental
• New Construction vs Existing Stock
• Credit Availability for Households and Developers
• Outlook
• Population, New Construction and Prices
2

State of the Market
3

6,000
5,000
4,000
3,000
2,000
1,000
Rising Prices Due To Growing
Demand and Low Supply
Ownership Rental
4
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
-
Portland MSA Housing Market
RMLS Market Action Reports, 12 MMA
Jan-95 Jan-00 Jan-05 Jan-10 Jan-15
New Lisings Closed Sales Median Price (rhs)
1.4
1.2
1
0.8
0.6
0.4
0.2
0
7%
6%
5%
4%
3%
2%
1%
0%
Portland Metro Rental Market
Source: Multifamily NW
Vacancy Rate Avg Rent per Sq Ft
2007 2009 2011 2013

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
Portland MSA Housing Affordability
Housing Expense for Buying Median Home Sold as
Share of Median Family Income, Source: OEA
Affordability Threshold
Lower Affordability
Ownership Rental
5
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
0%
Jan-92 Jan-97 Jan-02 Jan-07 Jan-12
Conventional, 20% Down 5% Down, PMI
30%
25%
20%
15%
10%
5%
0%
Portland MSA Rent
Average Rent as Share of Average Household
Income for Renters
1970 1980 1990 2000 2010
1970, 1980, 1990, 2000 Census, 2005-11 ACS, Source: IPUMS-USA.
2012-14 Author Calculations, Source: HUD, Zillow

$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
Ownership Challenges
6
$276k
$334k
$390k
$177k
$205k
$249k
$290k
$132k
$285k
$0
All Households Families Married-couple
families
Nonfamily
households
RMLS 2014
Median Sale
What Can the Typical Household Afford?
Home price maximum for median household, based on 30% Housing Cost to
Income Ratio and 4.1% Interest Rate
20% Down 5% Down
Source: 2013 ACS, RMLS, Author's Calculations

Supply and Demand
7

Bubble Impact on Ownership
8%
7%
6%
5%
4%
3%
2%
Multnomah County Ownership
Share of Current Ownership by Year Last Sold,
8
1%
1990-2013
1990 2000 2010
Hypothetical Steady Sales, No Bubble 2013 Actual
100%
80%
60%
40%
20%
0%
Portland Underwater by Year
Share of Zip Codes Where Current Prices Are
Higher Than Each Year
1996 2000 2004 2008 2012

Working Down the Bubble Impact
9
Slow Sales and High Share
Corbett
Which Areas are Making Progress?
Gresham, Parkrose, Mill Park
Cully, Pleasant Valley, Lents
Montavilla / Hazelwood
Fairview
Fast Sales and High Share
Overlook / Kenton
Scappoose
Troutdale
Downtown/
Homestead
Sellwood/Brooklyn
St John's
Arlington Heights
/Downtown
S Tabor /
Powell-Foster
King/Sabin
/Woodlawn
Hollywood/Rose City
Forest Park/
Sauvie Island
Hillsdale / Corbett
43%
41%
39%
37%
35%
33%
31%
29%
27%
25%
Hosford-Abernathy
Mt Tabor / Montavilla
Eliot/Boise, Hayhurst/Sylvan
Multnomah/S Burlingame
Slow Sales but Low Share Fast Sales but Low Share
2% 3% 4% 5% 6% 7% 8%
Share of All Homes Last Sold 2003-08
Turnover Rate in Past Year (Apr ‘13 – Mar ‘14)

Also Making Due with What You Have
10
$80
$70
$60
$50
$40
$30
$20
$10
$0
Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
Millions
Value of Remodels Near All-Time High
City of Portland Housing Permit Values, 12 Mth Sum
Alterations
Additions
July 2007
$107.8 m
Sep 2014
$104.6 m
Source: City of Portland, Bureau of Development Services

Household Growth Picking Up
11
60,000
40,000
20,000
0
-20,000
Oregon Household Formation
Year-over-Year Change, 12 Month Average
Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

1.0
0.8
0.6
0.4
0.2
1983 data omitted due to population loss
Underbuilding Binding Today
• 1 permit for every
2.3 new residents
• Nationally,
overbuilt during
housing boom
• Not in PDX
• Bust much bigger
than boom
• Supply
constrained
12
0.0
Housing Permits per Population Change
Portland MSA
Source: Census, Portland State University, State of Washington
1980 1990 2000 2010
Actual 1980-2004 Average

40%
38%
36%
34%
32%
30%
28%
26%
24%
22%
Renter Share of Oregon Population
1990s Average
Shift into Rental and Multifamily
13
20%
1980 1990 2000 2010
60%
50%
40%
30%
20%
10%
0%
Multifamily Housing Permits
Share of Total, 3 Yr Avg
1960 1970 1980 1990 2000 2010
Portland MSA United States

770
760
750
740
730
720
710
Credit Constraints?
Demand Side Supply Side
14
700
Average Credit Score for
Single Family Mortgage
2001 2003 2005 2007 2009 2011 2013
Freddie Mac Fannie Mae
40
30
20
10
0
-10
-20
Senior Loan Officer Survey
2014q1-q3 Average, Federal Reserve
Net Demand Net Tightening Standards
C&I Large C&I Small Const & Land Dev Multifamily

20%
15%
10%
5%
Distribution of Income and For Sale Inventory in
Assumes 20% Down, 4.1% Interest Rate, 30% Housing
Down Payment Issues vs Supply
20% Down Payment 5% Down, PMI
15
0%
the Portland MSA Market
Cost to Income Ratio
Household Income
Family Households Nonfamily Households Inventory
25%
20%
15%
10%
5%
0%
Distribution of Income and For Sale Inventory in
the Portland MSA Market
Assumes 5% Down, 4.1% Interest Rate, 30% Payment to
Income Ratio & PMI
Household Income
Family Households Nonfamily Households Inventory
Inventory based on October, 2014 snapshot from RMLS of individual properties currently listed for sale

Median Renter Household: $38,199
Rents Rising and New Apartments
are at the Top End
$/SqFt Price Income
Studio $1.88 $914 $36,560
1 Bd $1.32 $898 $35,920
2 Bd $1.01 $957 $38,267
3 Bd $0.96 $1,118 $44,732
Overall $1.16 $983 $39,332
16
List Price Income
$1,300 - $1,400 $54,000
$1,400 - $1,600 $60,000
$2,300 - $2,500 $96,000
Portland Market Overall
Multifamily NW, Spring 2014
New Development
Example
Income needed to keep rental prices at an affordable 30% of income

The Young and the Restless…
17
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Population by Age, 2015
Source: Census, Oregon Office of Economic Analysis
0 10 20 30 40 50 60 70 80
Root Setting Years U.S. Oregon ex PDX Portland Metro

35%
30%
25%
20%
15%
10%
5%
Young Oregonians Living at Home
Ages 18-34 Living with Parents or Grandparents
…Are Coping, But Getting Better
18
84%
82%
80%
78%
76%
74%
72%
Millennials and Gen Xers With Jobs
Employment to Population Ratio, 25-44 Year
Olds, 12 Month Moving Average
U.S.
Oregon
Jan-00 Jan-05 Jan-10 Jan-15
0%
ASEC CPS, 2 Year Average
Total
Not Enrolled in School
Bachelor's or More
1980 1985 1990 1995 2000 2005 2010

Portland in the Middle of the Pack
19
82%
80%
78%
76%
74%
72%
70%
Millennials and Gen Xers with Jobs
25-44 Year Olds, Employment to Population Ratio
2013 American Community Survey

Outlook
20

Population
21
3%
2%
1%
0%
45,000
30,000
15,000
-
Portland Metro Population Growth
Annual Average for Each 5 Year Period
1980-85 1990-95 2000-05 2010-15 2020-25

25,000
20,000
15,000
10,000
5,000
Portland Metro Housing Permits
Population Growth Based Forecast
Portland New Construction
22
0
2.3 per HH
1980 1990 2000 2010 2020
Portland Housing Outlook
Annual Average 2014-2020
Based on Population Growth
Single Family Multifamily
8,900
6,350
7,600
3,800
6,350
5,100
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1990-2005 Today Middle
2.5 per HH

Prices
23
220
200
180
160
140
120
100
80
60
40
Oregon Home Price Index
FHFA, 2000 Average = 100
Forecast-->
Inflation Adjusted
1995Q1 2000Q1 2005Q1 2010Q1 2015Q1 2020Q1

Summary
• Population and household formation picking up
• Underbuilding during bust constraining today
• Prices no longer cheap
• Consumer preference & affordability key
24

Contact
www.OregonEconomicAnalysis.com
@OR_EconAnalysis
joshua.lehner@oregon.gov
(503) 378-4052

Portland Metro Housing Overview

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