A Look into the Future of Oregon’s Housing Market 

November 4, 2021

By Carson Halley

Portland, Oregon

The Oregon Trail

At Westland, we take time to carefully study the larger macro trends affecting the housing market in both the short and long term and apply those learnings into our investment strategy.   Specifically, we look at overall housing supply, inflationary projections and their effects locally, and, of course, demographic trends. Examining all of these closely gives us almost a “crystal ball” look into the future of Oregon’s housing market -- and the crystal ball is telling us that we are going to need much more housing to meet upcoming market demand. 

 

In fact, according to a recent article in Oregon Business, we will need as much as 600,000 more housing units in the next 20 years. Why is this?  Well, the housing supply is already limited in the Pacific Northwest due to a myriad of factors:

  • Land use laws make existing buildings more valuable because land is more expensive here.  
  • Our region never really caught up on the housing needs from the great recession.  
  • And the recent uptick in inflation has a direct effect on Oregon’s housing supply. Probable effects of inflation are rising prices for rental property rates.  (Housing costs more to build and must be rented out at a higher price to break even.  Existing housing will be worth more because the replacement cost is higher )

 

A look at Oregon’s demographics tells the other part of the story. Josh Lehner, Chief Economist of Oregon, put out a recent report showing a leveling out of newcomers contrasted to the number of Oregonians leaving the state.  Joshua recently wrote to me saying: 

 

“First, net migration into Oregon is still positive… which points toward more housing demand.  Migrants are predominantly 20- and 30-somethings moving for a job or in search of a job. Second, demographics are a huge tailwind for housing this decade. Millennials are aging into their 30s and 40s which are prime home buying years. Even as they may be getting married and having kids at a later age than a few generations ago, homeownership rates in Oregon reach 50% by one’s mid-30s. That is Oregonians in their mid-30s are 50% homeowners and 50% renters. Third, Oregon is expected to continue to attract and retain working-age households. The number of renters will increase. However, that net increase is expected to be slower than last decade. As that big bulge of Millennials enter into their home buying years, that means many will no longer be renting. The good news is Gen Z is just as large of a generation as Millennials are. So the base renter demographics (mostly 20-somethings) is expected to remain stable or increase some.”

 

He also states that Oregon’s ability to attract and retain working‐age households is expected to remain intact in the years to come.

 

In terms of population, Generation Z has grown to match Millennials in terms of housing needs, and their average income is steadily rising. Overall we see that the number of jobs in Oregon are increasing each month and as a result unemployment is falling. With increasing jobs and a generation that's ready to rent or buy, housing stock will be in high demand over the next decade

 

Lastly, during the pandemic and subsequent lockdowns, employees were forced to work from home and proved it could work.  As such, companies allowing their employees to work from home is projected to climb steadily in the upcoming years.  As more people work from home, there is a desire for better housing options than in the past -- which means more renovation and building will need to occur. 

 

In summary, there are a healthy mix of macro trends that make investing in multi-family real estate in the Pacific Northwest attractive. If you are interested in learning more about our multifamily-housing investment portfolio, please don’t hesitate to reach out!

--Carson Halley


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