Investors Buying Up Almost 30% Of Oregon Homes As Hillsboro’s Median Price Hits $700,000

Housing is on everyone’s mind.  Those who have it are wondering what their homes are worth and maybe considering buying more—those who don’t wonder if they will ever be able to afford one.  In jobs-rich towns like Hillsboro, investors are greenlighting purchases with expectations of higher levels of appreciation.  With higher interest rates, we are seeing more purchases made by investors.  As a busy real estate broker in Washington County, I can attest that more of my buyers are from the investment community.  It is common to have brand-new homes in South Hillsboro grabbed up by investors looking to rent and ride the equity wave.  Real estate is a safe harbor against inflation and a long-term wealth-building strategy.

Core Logic tracks data across all sectors of the economy and is the premier analyst in the housing sector.  In the latest report on the percentage of homes investors buy, Core’s report showed that rents continue up and housing supplies remain tight. We are experiencing a historic housing shortage that started 20 years ago and could last for decades.  Home buyers are sitting on the sidelines, waiting for rates to come down. Still, the report shows that almost 30% of the real estate market in many markets, like Oregon, comprises investors buying property.

This increase in market share may be caused by the fact that home sales have slowed year over year. Many of you are on the sidelines waiting to buy a home. Rates are too high, and home prices have not fallen much, if at all.  The statistics show that investors have remained in the market and actively so.  So-called i-buyers that purchase remotely off the internet for cash, like Open Door, are not as active as they were, nor are house flippers.  Today, investors are private parties comprised of Baby Boomers and Gen-Xers.  The theory that Black Rock and Wall Street firms are buying up entire neighborhoods has been disproven.  Those big players may absorb 1-2% of the market.

Hillsboro, Oregon, is still a solid real estate market.  The lack of inventory, the massive rent increase, and the wild jobs situation have led our community up.  This week, the Median Home price was almost $700,000.  It’s hard to believe, but this is where we are at.  Check out the stats below from our Data provider, Altos Research.

While investors have been a dominant force in the housing market so far in 2024, a potential decline in mortgage rates later this year could be a game changer. This could entice buyers into the market, reducing the overall investor share. This scenario is more likely considering the current strength of the stock market, which might pull some investment away from real estate. Remember, the red-hot real estate market of 2021, with appreciation rates exceeding 25% in some areas, is not the current reality.

I preach to my friends and clients to invest in homes for themselves, their families, and their futures.  Hillsboro is committed to jobs, but we have few affordable homes.  Rates are not great, but historically, they are not horrible.  We are in the middle of what I have in the past called the Bay Area Effect – 2022. I wrote about it, and I coined that phrase 12 years ago.  

Here are the dynamics that create the Bay Area effect:

• Land Use Laws and Urban Growth Boundaries – love them or hate them, these very Oregon regulations are the biggest factor.  Supply and demand are totally subject to these boundary lines.  We use them to prevent sprawl, and they have made us chew up all the land in our City.  I would be unsuccessful if I had a million dollars in a briefcase, stood here in Old Orenco, and headed towards North Plains looking to buy one lot.  The reason is there is not one lot left to be had.
• TOO MANY JOBS- Hillsboro’s Success in Job Creation has spiked the housing market-  Hillsboro is the super economic engine by design.  For 30 years the plan in Hillsboro has been to have the largest mass of Industrial land in the region.  That landmass and the tax incentives we have offered have brought jobs by the thousands. Tens of thousands.  More will come with even more land being added by our City Council.  Now, we find ourselves in a situation with too many jobs and not enough homes.  Supply and Demand- super demand – have now come home to roost.
• Traffic—Traffic—Traffic—Many of my clients in the past few years have been from Tigard, Tualatin, Gresham, Portland, and Lake Oswego. They come to Hillsboro because what was a 20-minute commute from their homes in those neighboring towns is now 45 minutes to an hour. We have all lived this, so I need not say more. Work In Hillsboro—Live in Hillsboro—Problem solved.
• The Bay Area Effect-   I coined that term ten years ago when Hillsboro’s numbers were rising rapidly.  That term means out-of-control home prices, which is spelled out in the three bullet points above.  Take Palo Alto, a San Jose/Sunny Vale/Santa Clara suburb.  That market averages over $4.78 million for a home, and appreciation has increased hundreds of percent in the past decades.  Hillsboro is tracking along with that.
• Traffic, Jobs, and a Tight land supply—all of these things happened there and are happening here. The Bay Area Effect is very real.

That is the report on housing from Hillsboro, Oregon, and the State of Oregon. Investors are impacting the markets, and I expect that to continue for years to come.