As a realtor, I get a lot of questions from friends, family, and clients about what is happening in the market. Real estate is one of those industries that people are generally interested in talking about, especially when they’re about to buy or sell a home. On the news, you’ll often hear statistics thrown out about home sales and trends in the market, but those can sometimes be hard to follow. So, what is going on here in Eugene?
In 2019, Eugene saw a continuation of rising housing prices and limited inventory. According to Zillow and Business Insider, the average home price in the Eugene-Springfield area in 2019 was $325,700 and as we enter into 2020, most market observers are in agreement that prices will continue to move upward.
I started selling real estate in Lane County in 2012, when the market had incredibly high inventory, low prices, and one of the highest levels of foreclosures ever. While this current housing market might be frustrating for buyers, the market during and after the Great Recession is something I hope never to experience again.
Several factors have contributed to the continued rise in home values:
- The amount of people entering the buying market outnumbers new homes being built.
- The low number of homes being resold by existing homeowners further contributing to the inventory shortage.
- Historically low interest rates have remained steady, to the buyer’s advantage, and should continue throughout 2020, based on projections by the Federal Reserve.
The other sleeping giant is the millennial population, which just surpassed the previously largest US population, the baby boomers. The millennials (roughly, people born in the ’80s and ’90s) are poised to start buying homes, and this will add additional pressure on the housing market. Many people hope that the boomers, currently heading into retirement, will vacate their homes, increasing the available home inventory.
Our Eugene and Springfield communities are limited by the urban growth boundary, which reduces the ability to annex new buildable land, contributing to the tight real estate market. The urban growth boundary was designed to help cities better manage the growth of their communities and preserve forest and farmland to avoid urban sprawl. People have different and strong opinions on the urban growth boundary, but there’s little disagreement that the costs of development have increased as a result, and many of the new homes being offered are not within reach for a first-time buyer.
I previously mentioned that low interest rates are helping maintain the momentum of the current housing market. Money is cheap right now, and loan requirements have changed, so buyers don’t need as large of a down payment as in the past. Buyers that I have recently worked with have been able to lock in rates as low as 3.8 percent on a 30-year mortgage, with as little as 3.5 percent of the sales price as a down payment. Lenders are now offering new and creative financing options to help with the affordability of high home prices. By contrast, in the early ’80s, interest rates were higher than 15 percent, and buyers needed at least 5 percent of the sales price as a down payment.
In my opinion, these favorable interest rates benefit both buyers and sellers. Buyers looking to enter the market can take advantage of great rates and low borrowing costs. Sellers are able to reinvest the equity from their home sale, and while also taking advantage of favorable lending, they could potentially see minimal increases in their monthly housing costs. Keep in mind, while lending restrictions have loosened, there are still new rules to ensure that lenders do not repeat the past mistakes that directly led to the previous housing market crash.
You may be asking yourself why inventory levels have remained stagnant. In my experience, the average person finds the entirety of the real estate process foreign, stressful, scary, time-consuming, and expensive. The majority of people who own a home cannot buy without first selling the home they’re currently in. But at the same time, most people incorrectly prioritize the search for their new house over selling their current home. This creates a vicious cycle of window shopping in our local market. If you are in the market for a new home, it is imperative to first have a conversation with both a trusted real estate broker and a lender to best understand what your options are. Despite the industry stereotype, most of us agents genuinely do want to help people achieve their real estate goals!
As our local housing values have steadily increased, so have the costs of being a renter. While owning a home may not be for everyone, renting is no longer necessarily the more affordable option. For instance, many of the new apartment developments here in town are expensive, high-end luxury apartments, and student housing. As rental prices continue to climb, the traditional savings of renting start to dwindle, and being able to own your own home and build equity becomes more realistic. Never be afraid to have a conversation with a real estate professional in order to make a more informed decision.
Many first-time buyers want to buy in up-and-coming neighborhoods, such as the Washburne District in Springfield. This neighborhood is popular because it has more affordable prices, easy access to public transportation, bike paths, and eateries in the revitalized downtown, plus classic neighborhood charm. In Eugene, the Danebo area has experienced aggressive growth with new home construction and development. Affordable home prices, improving school districts, and access to parks and bike paths have all played key roles in improving the desirability and sense of community within this area. This continues to be an excellent option for first-time homebuyers looking to stretch their dollar.
In real estate, people are always wanting to capitalize on the next area poised to become popular, to buy on the fringe. Finding a neighborhood that is near a popular area and investing early can be a smart move. A great example of this is Eugene’s Whiteaker neighborhood. For more than 10 years, the ongoing “Whit revival” has resulted in a substantial appreciation of values and a demand for housing in the uniquely Eugene neighborhood.
Eugene and Springfield have both grown over the past decade. According to the World Population Review, Eugene has seen an estimated 6.7-percent jump in population since 2010. When I help relocate clients to our area, I always ask, “Why Eugene?” Common answers are our central location (an hour to the coast, two hours to Portland, an hour to the Cascades, and that it’s a town surrounded by forests and nature) and the ideal size of our community. There are also nationally ranked sports teams, wonderful theater and arts opportunities, trendy restaurants, and, of course, plenty of options for local craft adult beverages. Outdoor enthusiasts have access to biking, hiking, fishing, boating, camping, skiing, and much more. Additionally, the new Phil and Penny Knight Campus for Accelerating Scientific Impact at the University of Oregon will open this year, creating new opportunities of economic vitality for both existing and new businesses within our communities. Lastly, with Eugene hosting the 2021 World Athletics Championships Oregon21, the whole world will visit our community, and the secret will officially be out that Eugene is one of the best places to live—not just on the West Coast, but in the entire country.
Eugene’s real estate market is cyclical like any other market. The best thing for a consumer to do is to educate yourself, get prepared financially, and surround yourself with people you trust. Real estate is a long-term investment that requires well-informed decision-making and knowledge. It is important to understand that while each person’s situation varies, achieving your goal is like running a marathon, not a sprint. Start training today!