With the new year upon us, here are five things you should know when buying a house in Oregon in 2018.
1. Oregon home prices are slowing down, but still rising.
Home price appreciation has been the big story in Oregon for the last couple of years. Housing markets across the state have outpaced the national average, in terms of price appreciation. This is true for the broader Pacific Northwest as well.
In fact, Washington and Oregon posted the biggest year-over-year gains of any state in the country, during 2016 and 2017. And while prices appear to be slowing down a bit, they are expected to continue rising throughout 2018.
That's the first thing you should know about buying a home in Oregon in 2018. If you postpone your purchase until later in the year, you could encounter higher housing costs.
2. Loan limits have increased.
The loan limits for Oregon have been increased for 2018. Federal housing officials increased the limits for conventional, FHA and VA loans, in response to rising home values.
In 2018, the conforming loan limit for most counties in Oregon will rise to $453,100. FHA loan limits will range from $294,515 to $454,250, depending on the county where the house is located.
Note: Home buyers with sufficient income can borrow more than these maximum amounts. When a home loan exceeds the limits for the county where the home is located, it is referred to as a jumbo mortgage loan.
3. Mortgage rates are also expected to rise.
As if rising home prices weren't enough to get the attention of Oregon home buyers, economists are also predicting a gradual increase in mortgage rates. But the average rate for a 30-year fixed home loan is expected to remain below 5% for quite some time.
In December of 2017, Freddie Mac updated its long-range forecast for the U.S. economy and housing market. The company's economists expect 30-year mortgage rates to end up averaging 4.0% for 2017, and 4.4% during 2018. Over the horizon, they expect 30-year home loan rates to average 4.7% in 2019. This is the general consensus shared by other analysts and economists as well.
This is another important trend to watch, as it could affect anyone buying a home in Oregon in 2018.
4. A down payment of 20% is not always necessary.
Surveys conducted by real estate industry groups over the last year have shown that many home buyers think they have to put down at least 20% when buying a house. But that's not true.
These days, some mortgage programs allow for a down payment as low as 3%. The FHA requires just 3.5% of the purchase price. The VA home loan program for military folks offers 100% financing.
Additionally, home buyers are often able to use down-payment funds from a third-party donor, in the form of a gift. This is something to be aware of when buying a house in Oregon in 2018.
5. Housing inventory is still tight in most cities.
The supply-and-demand situation in housing markets across Oregon has been lopsided in recent years. There is plenty of demand from buyers, but not enough inventory to meet it. These supply shortages have boosted home prices while fueling fierce competition among buyers.
And these trends will likely continue in 2018, to some degree. New home construction has ramped up over the last year or so, but it's still not enough to balance the real estate market.
Consider the numbers. A "balanced" real estate market is said to have somewhere around five months worth of supply. In November, Portland had roughly a two-month supply of homes for sale. That's a tight market.
While the inventory crunch is most severe in Portland, similar conditions have been reported in other parts of the state. This too will affect those who are planning to buy a home in Oregon in 2018.