Should You Buy a Home in Portland in 2024? An In-Depth Look at Renting vs. Buying
According to a recent survey, 94% of people consider owning a home as part of the American Dream, yet 51% of non-homeowners worry they might never achieve it. With rising housing costs, increasing federal interest rates, and a limited housing supply, these concerns are not unfounded.
While navigating the current market might be challenging, renting is not the only option in Portland. Let’s explore the financial implications of renting versus buying as we move into 2024, particularly in Portland, Oregon, and weigh the pros and cons of each.
Rental Costs in Portland, Oregon in 2024
As of 2023, Zillow reports the median rent in Portland at $1,695. This is 15% lower than the national average of $2,000. However, Redfin's estimate places the median rental cost at $2,672, reflecting differences between apartment buildings and detached homes, townhomes, and condos. Thus, rental costs in Portland likely fall between these figures based on location, amenities, and property type.
Common wisdom suggests spending 30% of your income on rent. For a $4,000 monthly income, that would be around $1,200. Unfortunately, finding rental options within this budget in Portland can be difficult.
Redfin’s study shows that renting consumes 53.7% of income, nearly double the recommended percentage. With only 23 affordable rental units available per 100 low-income households in Oregon, the state ranks poorly for affordable housing alongside California.
Comparing Rental and Mortgage Costs
The median home price in Portland in 2023 was $520K, with the median monthly mortgage payment at $4,107. This indicates that owning a home is about twice as expensive as renting based on median costs. Despite this, paying a mortgage contributes to property ownership rather than paying rent to someone else.
Moreover, a fixed mortgage payment provides stability against annual rental increases, offering some financial predictability.
Rental Increase Cap 2024
In 2023, Oregon implemented a rent increase cap for market-rate rentals older than 15 years. Landlords can only increase rent by up to 10% annually, aiming to curb excessive rent hikes. Newer properties face similar restrictions but may raise rents higher. This legislation will continue to affect rental prices in Portland in 2024.
Although these rules help manage rental price increases, they don’t fully address the housing shortage declared in Portland since 2015. Fixed-rate mortgages provide better long-term financial stability compared to rental increases.
Increase in ADUs
In 2023, Portland expanded zoning for Accessory Dwelling Units (ADUs), making it easier for homeowners and landlords to create additional rental spaces. While this doesn’t directly resolve the housing shortage, it increases rental availability and density in various Portland neighborhoods.
Rental Pros
Generally cheaper than a mortgage
Potential to share rent with roommates
Easier to find housing near work and transit
Increased rental units due to ADU incentives
Rental Cons
Rent payments do not build equity
Rent can increase, potentially exceeding affordability
Limited control over property modifications
Rental agreements may have stricter rules (e.g., no pets)
Typical Expense to Buy a Home in Portland, Oregon in 2024
The median home price of $520K and a median mortgage payment of $4,107 make buying a home in Portland approximately twice as costly as renting. This significant expense, coupled with down payment requirements. Even with the availability of downpayment assistance programs in Portland, can be a barrier for many.
However, owning a home offers investment opportunities. Monthly payments contribute to property equity, homes typically appreciate in value, and there are tax benefits and financing options like HELOCs.
Despite high prices, a downward trend in home prices into 2024 could make now a better time to invest. High interest rates and the ongoing housing crisis may present challenges, but buying a home could be a worthwhile investment in the long run.
Housing Supply Issues
Portland’s real estate market faces supply constraints, with homelessness rising and available inventory shrinking. This can drive up prices and increase competition for homes, especially when mortgage rates decrease.
Purchase Pros
Homes offer financial tools and tax benefits
Potential to build personal wealth over time
Investing in property instead of renting
Freedom to customize and improve the property
Purchase Cons
Limited housing supply
Potential HOA requirements and restrictions
Selling the home requires navigating the real estate process again
High interest rates increase overall costs
Final Thoughts
Currently, renting is more affordable than owning a home in Portland. However, owning remains a better long-term strategy. As interest rates are expected to ease, Portland’s real estate market may rise due to the persistent housing supply shortage. Investing in Portland real estate is in fact a smart decision for long-term financial stability.
If you’re considering buying a home in Portland, our team at Gerritz Realty Group is here to assist you. Navigating the 2024 housing market can be complex, but with our expertise, you can find the perfect home.
Visit www.gerritzrealtygroup.com today!
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