Realtor’s take: Portland’s housing market needs “small” more than ever
Because land is half the price of a Portland home, Rhonda Spencer says “cutting lot size down will reduce the purchase price”
Interviewed by Henry Kraemer & Madeline Kovacs | August 27, 2018
We met Rhonda Spencer recently at a happy hour on N Killingsworth, where she came to learn about the rule changes being proposed for Portland’s residential neighborhoods. It quickly became clear that she had more to say about ways that Portland can make sure that more homes are affordable to her clients.
We emailed Rhonda with some questions, trying to get a better handle on what realtors and their clients have to consider when navigating the current housing market:
What has your professional experience shown you about Portland’s housing market right now?
I work with a lot of first time home buyers who want into the Portland market. Many of those buyers are facing a difficult lack of inventory under 400K, which is a fairly typical entry price point. Homes like this are hard to find right now and in high demand.
What are some trends you’ve been seeing?
Portland home prices have been on a meteoric rise since 2006, and, after a brief dip from the crash in 2008, are back up again. In 2016–2017, home prices were rising nationally about 5% to 6% per year on average. Compare that to Portland’s growth rates over the same time period of 8–10%. This can partly be attributed to a shortage of inventory — people staying in their homes longer, and new home building slowing because of rising labor and material costs.
In the past few months, growth in Portland has started to slow in the $500K-and-higher price points. We’ve begun to see price reductions, extended days on market to spite the low inventory. That tells me that the market is beginning to correct itself.
However, wages have not kept up with the rising cost of housing. Homes offered at $400K and under are still very competitive. Starter homes in this price range continue to see multiple offers and homes closing over asking price.
Who isn’t this helping?
The Millennial generation are buying starter homes with limited budgets, and in some cases lots of debt. The Boomer generation are looking to downsize into smaller homes that just aren’t available right now.
So more specifically, what sorts of homes are these Millennials & Baby Boomers seeking?
Boomers who want to age in place and Millenials who are just entering the housing market are often looking for the same kinds of homes. They want smaller homes, on smaller plots of land. They don’t want to deal with the upkeep of a big piece of land, and would rather spend their money on food, entertainment and travel. They also want to be able to ditch the car and walk to stores, grocery and restaurants. Many also want to live near public transit options.
Is the shortage of smaller housing options changing people’s behavior?
People who are looking to downsize aren’t finding a lot of options in Portland, so the idea of building one or more Accessory Dwelling Units on their current lots (if they are large enough and zoned appropriately) is becoming a hot topic. I see a lot of people who are interested in converting part of their homes — mostly basements — into ADUs, or building an exterior ADU to rent out. People who used to just sell and find a smaller home when they wanted to downsize are now considering building an ADU on their current property. The proposed zoning changes are part of what is driving this, and so is lack of existing small home inventory.
Do you think that the city’s plan to re-legalize duplexes, triplexes, two ADUs, for example, could help change the equation?
It would most likely result in lower prices for smaller units. Right now the demand for small homes on small lots is still very high, and inventory very low, so prices are staying competitive. Condominiums are not as high in demand as the smaller, detached homes. Affordability plays a role there — adding Homeowners Association (HOA) fees and assessments to the price of the mortgage makes the payment higher than a mortgage on a small home in many cases.
And for your clients?
I deal with so many of these stories every day. I am seeing a lot of aging people who have a limited income who need a smaller home within walking distance to services because of declining mobility and earning power. I see Millennials saddled with lots of debt from school who want to buy a first home but are priced out.
What can Portland do to improve this scenario?
The city needs to increase incentives (through permitting as an example) for private development companies to build smaller homes on smaller lots. Developers need to make it pencil out. The city needs to help them do that or developers won’t be building smaller units that the city needs.
Designate more small and “missing middle” zoning outside of close-in Portland (where they are already planning these changes). We need the same changes in neighborhoods that are east of Highway 205.
Since land (dirt) is usually half or more of the expense of a typical detached single family home on a standard size (5000 square foot) lot, cutting that lot size down will reduce the purchase price of the home.
Many of the 700–1100 sq foot homes that you see on small 2500 sq foot lots were built in the 20’s and 30’s as cottages that existed on larger lots, and then were subdivided at some later date. They are hard to find and get sold quickly because of the affordable price tag. Today we’re seeing infill or “skinny houses” built mostly in areas where land is becoming more valued and in neighborhoods where home values are still staying somewhat affordable (at least for now). Areas like Foster-Powell, Portsmouth, St. Johns, and Lents. Homes with little to no land are going to be your most affordable properties.
Everyone wants to buy a duplex but there aren’t many of them. Duplexes and triplexes built on smaller lots would help keep prices down per unit and would be a great alternative to Condominiums.
Condominiums done right can also be a great way to purchase housing inexpensively. As long as you don’t have HOA fees that have to account for luxuries like swimming pools, recreation centers, etc. which drives up HOA fees, and your house payment. Condominiums with low HOA fees are a great way to purchase a home affordably.
What would you say to people who are opposing increasing density in Portland’s residential neighborhoods right now?
I would argue that the “norm” of large single family lots and homes only really goes back to the 1920’s. Before that time we had all kinds of small and middle-sized housing options. Some of the best examples of smaller condo and apartment buildings are still successfully gracing our neighborhoods today, with very robust occupancy.
The main argument that I hear from people who are opposed to greater housing density is that they don’t want to see old, historic homes and buildings demolished. They value the character of these neighborhoods. I can’t really blame them for that feeling. No one wants to see historic homes demolished and most want to see a historic neighborhoods character preserved. But Portland is changing and we need to come up with ideas that can house this growing population without infringing on our urban growth boundary, which is also central to Portland’s character. I don’t think that it has to be an either/or solution. I think that with smart development that seeks to fit into these neighborhoods, and with increased zoning which allows private large homes and lots to become smaller homes and lots, we can both increase our density and sustain our historic neighborhoods.
So in your opinion, what does it look like to be progressive on this?
Realtors believe deeply in the value of home ownership for everyone, at every income level. Statistics show that homeownership has a direct impact on stability and financial well being. If there aren’t enough affordable housing options for people who want to own a home, then the city of Portland is doing its citizens a disservice. The option to purchase a home should not be relegated only to the wealthy. Portland has an opportunity to be different, and the time is now to make those policy and legislative choices. I as a Realtor am firmly behind more affordable housing, and that means thinking of ways to deliver smaller, denser housing options.
What’s your recommendation for how Portland should move forward?
Realtors are all about looking at a property’s “highest and best use.” If a home’s “highest and best use” is to be kept a historic, single family home on a large lot, because of its contribution to Portland’s history and character, then there is a reason for it to stay that way.
However, if the property is in bad repair, would require more resources than is reasonable to restore, is not important in history or character of the city, is a hazard or an eyesore and harms the character of a neighborhood, or the land it sits on is in an awkward zoning “buffer” zone, then that land’s “highest and best use” would probably be to put a new building in its place. If that new building can accommodate more than one family and increase inventory and affordable housing, that is preferable than replacing that single family home with another single family home.
If there can be a greater number of people that can become homeowners through greater availability of more affordable, smaller homes, Realtors will be behind this for obvious reasons.
Rhonda is a broker for Urban Nest Realty where she works with first-time home buyers and seasoned investors alike. She is also a HOWNW Certified Specialist, helping first-time home buyers get the information they need.
Rhonda volunteers on the St. Johns Center for Opportunity’s Affordable Housing Committee, whose mission is to strengthen North Portland’s ability to organize around affordable housing. She believes deeply in home affordability and home ownership, and sees these things as cornerstones to healthy communities.
You can also learn more about Rhonda and her work though her personal realtor page, portlandnorthwesthomes.com.
Q’s & A’s edited.
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