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Prospective buyers may become prolonged renters as interest rates rise – Portland, Oregon

Portland, Oregon 2022-06-20 21:11:45 –

Professor PSU: High interest limits purchasing power

Portland, Oregon-The vibrant market in Portland can cool as the Federal Reserve has implemented the highest interest rate hikes in over 40 years.

Freddie Mac reports that three rises in interest rates in 2022 raised average 30-year mortgage rates from 3.11% on December 30, 2021 to 5.78% on June 16, 2022.

Gerald Mildner, an emeritus professor at Portland State University and director of the school’s housing center, expects housing to increase in value, but far from the 12% annual increase seen in recent years.

As Mildner explains, it should ease the “pressure cooker” in the housing market.

“It will be a slower number. The challenge is for buyers and sellers to get a more realistic number of the value of their homes, either in the homes they sell or in the homes they buy. To get it, “he told KOIN6 News.

Cooling comes from the buyer side of the equation, as interest rates severely limit purchasing power.

Mildner calculated the numbers by comparing the average rates of payments for a $ 500,000 home.

Mildner has found that payments cost nearly $ 900 a month.

“When prices and prices change drastically, deer-like people often remain in the headlights,” Mildner said. “They don’t know how to react to that information.”

He also flipped the equation to see how much he could afford now for those who can only pay $ 2,108.02 a month.

Mildner estimates that these buyers will lose more than $ 150,000 in home purchases. He believes it will turn future buyers into long-term renters.

“Especially when you see people buying homes saying,’Wait 3 months, wait 6 months’, it’s going to be tougher and more expensive to see if the buying conditions improve. I expect. .. So whether you’re buying a house or renting an apartment, I think it’s a difficult time to be a consumer. “

Mildner has problems with the permit process to delay the construction of the city of Portland, but some elected leaders admit that they are trying to change the process to make it easier. ..

Ron Garcia, Executive Director of Public Policy Oregon Rental Housing Alliance Oregon’s rent management bill says it will put upward pressure on prices.

One reason is that the rent management formula limits the annual growth to 7% plus no more than the inflation rate for the same tenant.

“The challenge is for buyers and sellers to get a more realistic picture of the value of their home, either for sale or for purchase.”

— Professor Emeritus of PSU Gerald Mildner

The formula does not control new tenants, Garcia says, motivating landlords to use them.

“When they get a vacancy, it’s like a’jailbreak’card,” Garcia explains. “They can suddenly redo the properties and make their rents much higher. And to whom does it benefit? It doesn’t benefit those who are at the highest risk of housing demand.”

As Garcia explains, RHA stands for “Mom and Pop” landlord. Garcia is a real estate manager herself and reports two vacancies out of his more than 500 units.

June is usually the time when about 20% of the market is sold.

He said he hopes that sellers who couldn’t sell their homes in the Great Recession will become “unintentional landlords” and try to get the most out of the situation.

“If they decide to put their property on the rental market, it’s a shorter period of less than a year and the inventory is so low that it’s the best rent they can get.”

Prospective buyers may become prolonged renters as interest rates rise Source link Prospective buyers may become prolonged renters as interest rates rise

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