Home sales took off in the Portland area last month, perhaps as buyers tried to get ahead of rising mortgage rates.
But signs point to another summer slog for buyers, with few options on the market and prices continuing to climb. Bidding wars remain common, particularly on homes within reach for first-time home buyers.
More than 1,800 homes sold in the metro area in February, according to the Regional Multiple Listing Service, an 8.2% increase compared with the year prior.
The median price for homes that sold in February, meanwhile, was $385,000, an increase of 8.9% from a year earlier.
The month's sales represent deals struck in the waning months of 2017 and early 2018, as 30-year mortgage rates inched closer to 4 percent. They crossed that threshold in January and have risen steadily since, according to the government-backed mortgage buyer Freddie Mac, landing at 4.44% last week.
The trend might have pushed buyers to make their moves sooner rather than risk further erosion of their ability to borrow money, said Matthew Gardner, the chief economist for Windermere Real Estate.
"By the end of this year, mortgage rates will be knocking on the door of 5%, which obviously limits buying power," Gardner said.
The number of homes newly put on the market, meanwhile, was only slightly higher than this time last year. At February's selling rate, it would take less than two months to sell every home on the market. Anything below six months of supply typically indicates a seller's market.
That sets the stage for another spring and summer buying season characterized by a slim inventory. Bidding wars are breaking out on homes in central Portland and in Beaverton, said where buyers are seeking affordability in the region's largest city, said Michelle Maida, a managing principal broker with John L. Scott Real Estate.
"It's going to be tough to buy houses in the sweet spot" of $300,000 to $500,000, Maida said. "First time buyers have to have a decent down payment, but they're competing against cash. They're competing against investors."
There's also little on the market for current homeowners looking to upgrade. Maida recalled two clients, a couple who had been looking for a move-up home for two years, in February jumped into a bidding war for a house that attracted 10 offers. Their winning bid was $85,000 over the asking price, and not far from other competing bids.
"Imagine coaching your buyer to do something like that," Maida said. "That would make me break out in sweat if it was me. Of course it made me break out in sweat for my buyer. But that's what we had to do to get a house."
The logjam shows no sign of easing. Current homeowners aren't selling and moving as frequently as they once did, and construction of new homes for sale remains well below the levels seen in the late 1990s or early 2000s.
Prices, meanwhile, continue to rise at a rapid clip — far quicker than wages.
Those increases have slowed in Portland over the past year, suggesting the region is nearing the limits of affordability. The rising mortgage rates might further pump the brakes.
But the combination of rising prices and borrowing costs will continue to lock more buyers out of the market.
Homes moved slightly slower in February. Those that sold during the month stayed on the market for an average of 10 weeks from listing to closing — a week longer than the same time last year.
