Ahead of the presidential State of the Union Address, The National Association of Realtors released its own Housing State of the Union Report. On a national level, housing prices have continued to rise. Central Oregon is experiencing the same issues as most of the country: strong demand for homes—particularly starter-level homes—and low inventory levels and resulting price increases fueled by those conditions. Rising home prices and relatively stagnant wages are further eroding the affordability of home ownership for the average first-time homebuyer earning a median income.
The report says strong demand and the need for more inventory for first-time millennial homebuyers is not being met, because the bulk of new home construction is in the mid- to upper-level price points. Nationally, inventories dropped 8.8 percent for the calendar year 2017, while new home construction increased by 10.2 percent over the year 2016. Locally, as well as nationally, rising land costs make it financially unfeasible for builders to construct lower-cost housing and to develop the land, along with a shortage of construction labor. The report recommends creation of government-builder partnerships to help ease the labor shortage in particular and to rehabilitate some areas.
Despite the lingering problems of housing affordability, housing demand is expected to increase as interest rates are still low and demand is high. Other NAR reports have also forecasted an easing of the inventory shortage later in the year, which is good news. The new tax law which caps the mortgage interest deduction and property tax deduction is mentioned as likely to have an effect on the high-end market. On a local level, this could mean an influx of retirees and people on fixed incomes in neighboring states. Finally, as expected, all these factors mean prices are expected to rise again, but perhaps more modestly than recent years.