What Is Up With 2025?

This time of year, I usually do a blog giving my thoughts on what I think the next year will bring in the Portland Metro Real Estate Market. With experience, I have found that it is next to impossible to predict what rates will do, how buyers will react and what that will mean for prices + inventory. What I can do is lay out the current market dynamics and how I think that will trend into the future. The two biggest players in these dynamics are rates & inventory.

Where does this lonely Baja road lead? Only one way to find out.

Sitting here today, a 30 year mortgage, with good credit and a decent down payment, is +/-6.75%. It was a little lower last Fall and a little higher going into Winter. The hope is that it will come down into the upper-5’s lower-6’s at some point this year…but I’m done holding my breath for that. Here is an important take-away from a recent market update from the title company industry: 67% of buyers are waiting for rates to lower before taking any action. I don’t have any hard data, but I’d be willing to bet that it has been this way since rates started to spike in the Summer of 2022. I call this pent-up demand. There are TONS of first-time buyers out there who want to take action. There are TONS of middle-aged folks who would really love to make that step-up purchase. Everyone is waiting for something happen…and a smaller percentage of people are actually taking advantage of the benefits of acting now.

Inventory, measured in months, is currently at 2.7. It has been hovering in this range for the past 18 months and it is generally SIGNIFICANTLY HIGHER than it has been in a number of years. What does this mean for buyers and sellers? Buyers have a lot more liberty to negotiate price, repairs and credits. Sellers are still getting a really good bottom line at closing, but they must be prepared for more days on market and flexibility on negotiations.

In one word, I’d say that the current market is BALANCED. As long as rates + inventory stay where they are, it is likely to continue that way…plus or minus a little. If there is a sudden dip in rates, then the dam could break, flooding the market with buyers and eating up the inventory that has grown. The chances of this scenario happening are pretty low; I’d put it at 10%. The Federal Reserve has shown, by its past actions, that it is more likely to make incremental changes over a longer period of time. BUT an interest rate of 6.10% looks a whole lot better on the way down than it did on the way up so there is a more likely scenario of pulses of buyers randomly arriving in the market as the optics of rates appear better.

The big question for all buyers as of late has been: do I buy now when prices are flat, and I can get a better deal? Or do I wait until rates are a little lower and I’ve got to compete to get my offer accepted? Personally…I think the answer is pretty obvious.