In Part I of this series, I proposed some reasons for the housing prices we see today like basic supply and demand dynamics and pandemic influences such as a meteoric rise in costs of materials and an increase of people working from home.
On this last point, we left off with the notion that, as less workers are tied to the cities they are employed in, there has been a huge moving spree from historically expensive cities like Seattle and San Francisco.
These buyers are now able to afford houses in states like Oregon. This puts pressure on the supply and demand since more buyers are coming to the market.
How might we go about solving this inventory problem and allow for cheaper home prices you may ask? Well, it is not as simple as building more homes to increase the inventory.
One of the systems in place keeping cities in Oregon from quickly creating more housing inventory is Urban Growth Boundaries (UGB). Oregon is one of only three states that have these development boundaries. All Oregon cities must have an Urban Growth Boundary which is used to designate where the city expects to grow over the next 20 years.
This boundary limits how wide the city development can sprawl out. Cities may amend their boundaries as needed to accommodate growth, but the amendment process usually takes anywhere from two to 15 years depending on the city.
Before amendments can even be filed, the city must find what type of land they need by careful analysis. This process is very time consuming, which can lead to housing inventory at extreme lows before actions are taken to remedy them.
At the end of the day there are a lot of factors that play a role in our housing market. Urban Growth Boundaries are not the only restraint on developers, there are several codes and laws in place that need to be resolved before homes can be built.
Overall, the real estate market is healthy. The inventory we do have isn’t super low; it is just selling fast.
No one is 100 percent sure what will happen to the housing market in the future, but the economists I have talked with don’t think we will see another market crash like 2007 for many years.
The federal reserve has held a good balance in the mortgage market, and they are combating these inflated prices by raising mortgage rates. These raised rates will cause a high price of homeownership until home prices creep down to normal and we see a more balanced market.
This summer will be a hot time for the real estate market, homes are expected to hold their values until the fall and winter. Then the high mortgage rates will push the prices down for the following year. At least that is what we are hoping for, and only time will tell.
River Molyneaux is a Cottage Grove Windermere Real Estate agent.