For most Millenials, home buying is out of reach
There are exceptions, but low supply and high prices are keeping many young homebuyers out of the Portland real estate market
A prolonged housing shortage and the higher prices that shortage has created is making it increasingly difficult for Portland-area Millennials to grab a piece of the American Dream.
Thats especially true in places like Lake Oswego, local realtors say, where higher-than-average home prices and lower walkability scores are pushing young homebuyers away.
Number one is they cant afford it, whether its (because of) college debt or they dont have a high-paying job out of school or whatever, says David Sly, a principal managing broker at Coldwell Banker Seal. Secondly, its not like the Mississippi arts district or Alberta they dont have Pok Pok to walk to. Downtown (Lake Oswego) is being revitalized, but its higher-end.
Contrary to conventional wisdom, the vast majority of Millennials in Portland and across the country do want to eventually own their own home, according to a survey by Zumper, a startup that tracks issues facing renters. It found that 87.5 percent of Millennials in Portland want to buy a home at some point in their lives, just slightly less than the 90-percent national average.
But for many, the gap between that dream and reality is growing ever wider. Median home prices in the Portland region are now at $340,000, a nearly 12 percent increase over last year. And rents also are going up fast. According to the ABODO rental tracking service, the price of a one-bedroom apartment in the Portland area jumped 13 percent to $1,370 between July and August, the fourth-biggest increase in the country.
And theres more bad news. According to the Zumper survey of 6,000 Millennials nationwide, only 34.8 percent of those in Portland said they are earning enough money to afford the median mortgage for a single-family home. That is far less than most other cities that were surveyed, including Austin, Texas, where 71 percent said they could afford a median mortgage, and Atlanta, where the figure stands at 57.4 percent.
Another indication of the financial challenges facing Millennials in Portland: 65.2 percent report living with a roommate, the second-highest figure in the survey behind Boston. The national average is 62 percent.
Still, some young Portlanders have figured out how to swap their monthly rent payments for mortgages even in Lake Oswego, where the median home price now tops $536,000. Amanda OHaver and her husband, Andrew Fields, purchased their first home in Lake Oswego in June 2015. Both are 26, and OHaver grew up in Lake Oswego, so she says they wanted to live here in order to be close to her parents and because she knew it was a great place to start a family.
Were not the typical Millennials, OHaver says. Were getting married and we wanted to buy a house, and wanted to get into a good school district, and really just start building our equity now. We like the small-town feel; were not city dwellers.
The couple was able to find a house that fit their needs after a two-and-a-half-month search. OHaver says they were lucky and didnt have student loans or car payments at the time, enabling them to qualify for a large loan. But the process was still difficult; they made offers on four other houses that didnt pan out.
We were outbid, she says. When youre going up against a second- or third-time homebuyer, they can say, Oh, I can go 10, 15, 20,000 over asking. We would put an offer in and that was our best offer we didnt have the ability to play the game like everyone else was.
OHaver works as a loan officer, and she says that student loans and high market prices tend to make the process of finding a house difficult for younger buyers, especially in the Portland area. But that doesnt mean Millennials arent interested in eventually becoming homeowners, she says.
I know a lot of my friends have been talking Im a loan officer, so they ask me lots of questions, she says. Theyre all thinking about it.
OHaver and Fields found their house with help from Judy Adler, a principal broker at Lake Oswegos Windermere West office. Adler says she regularly works with Millennial homebuyers, but they typically find homes in other parts of southwest Portland. She estimates that roughly 5 percent of her Millennial clients end up in Lake Oswego.
For Millennials, its really about having the cash to close, Adler says. Even though theres some good loans out there with low down payments, unless theyve got a family member or a wealthy friend thats willing to help them with a down payment or closing costs, its just very difficult for them to get into Lake Oswego.
In addition to the high prices, Adler and Sly each point to added costs that tend to discourage Millennial homebuyers inspections, appraisals and monthly membership dues for homeowners associations. Those fees all tend to be higher in Lake Oswego, they say, mirroring the citys higher-than-average home prices.
Home prices outpace wages
The situation is not unique to Millennials, of course. Many people in all age groups are having trouble buying homes because housing prices are increasing faster than wages.
Between June 2015 and June 2016, the median home price in the Portland region increased nearly 12 percent, according to RealtyTrac, a national real estate tracking service. But wages only increased 7 percent, RealtyTrac said in a June 22 report.
Because of that, the average worker in the Portland region would have to spend 48 percent of their earnings to buy a median-priced home, RealtyTrac said up from 42 percent at the beginning of the year.
Still, some Millennials have figured out how to do it. Anna Williams and her husband, Michael, bought a 90-year-old home in Portlands Brentwood-Darlington neighborhood in April. She is 22 and he is 31. Both are certified nurses and part-time students.
Anna says she searched for homes being sold by owners in the neighborhoods where the couple wanted to live. She and Michael connected personally with the sellers of the home they bought, who were another young couple. They kept the price below their $225,000 maximum. Michael qualified for a low-interest Veterans Administration loan because he served in the U.S. Navy.
I think its really important to know that if a potential buyer looks in the right places, they wont have to compete with investors offering 30 percent above the asking price, Anna says. There are Portland homeowners out there who want their homes to go to good people that will love and respect the property.
Motivation pays off
The Zumper survey was released Aug. 10, just two days before the most recent Regional Multiple Listing Service report. It found that between July 2015 and July 2016, the median sales price for a home in the Portland region increased 11.45 percent, from $304,900 to $340,000. Although new listings rose slightly from June 2016, the total inventory was still well below historic levels, continuing the sellers market that is producing bidding wars on many properties.
Median prices near employment centers are much higher, including $470,000 in West Portland and $385,000 in Northeast Portland. And theyre higher still in places like Lake Oswego and West Linn, where the RMLS report says the median price sits at $536,000.
Still Realtor Bryan Atkinson says todays high prices are not preventing motivated Millennials from buying their first homes in the Portland region. Atkinson, who worked with Anna and Michael Williams, says about a quarter of his clients are young first-time buyers.
They are wanting to buy for the same reasons as everyone else, for the security and to build wealth. But their incomes are limited, so they are not looking in the most expensive close-in neighborhoods, but in East Portland and Gresham, where homes are in the $200,000-$250,000 range and may need some work, says Atkinson, who works in John L. Scotts Northeast Portland office. Almost all of them are married and both partners have jobs, and they also have at least a little money savvy and the ability to do some home improvements themselves.
Anna Williams also says owning a home is rewarding. She and Michael were living in an apartment in the Hollywood District when the urge to buy a home hit.
As the end of our yearlong lease approached, I started to fear everything I was hearing on the radio about peoples rent going up by hundred-dollar increments, and I just didnt see the point in staying in an apartment if our money wasnt going anywhere in the future, Anna says. I hope other Portlanders out there can find their special place, renting or owning, and be able to enjoy this city without so much worry for the future. I know for sure its hard to feel invested in your city when you feel like youre being priced out of it.