Will Inflation Affect the Housing Market in Oregon?

Inflation and the housing market have been hot topics lately. Both directly affect the cost of living, but how do they relate to each other, and what does it mean for Oregon homebuyers and sellers?

Get answers from our Oregon community credit union below.

How does inflation affect the housing market?

Inflation essentially means the price of goods and services is going up. A steady increase is normal, but 2022 saw a 40-year-high spike of 8.5%. When incomes don't rise simultaneously, affordability issues arise.

Inflation and other economic shifts aren't the only factors at play with the housing market, but they tell part of the story. Here's what to know.

 

Do home prices go up during inflation?

Just like an uptick in what you pay at the gas pump, rising (or inflating) home prices technically are inflation. Listing prices are currently up nearly 20% year over year. While sellers are reaping the benefits, this makes it difficult for first-time homebuyers to afford properties.

Interest rates hovered around a historically low 3% the last couple of years. But the Federal Reserve recently raised them to just over 5% in an attempt to cool both inflation and the red-hot housing market.

A difference of just 2% could mean homeowners pay upwards of $500 more per month toward their mortgage in interest alone. The Federal Reserve's reasoning is that it may price out some prospective buyers, giving remaining buyers more choice, thereby reducing competition and ultimately lowering property prices.

As you can see, neither scenario results in winners all around. However, the hope is that both inflation and the cost of buying a home will balance out before long. Home loans and mortgage solutions tailored to each buyer's unique needs continue to be invaluable to homebuyers.

Read our article for tips on Saving for a Down Payment on a House.

What does this mean for Oregon's housing market?

Like most of the country, Oregon's housing market is notably hot. The median sale price is currently $518,600, a staggering 14% year-over-year increase. However, there are some signs of it cooling off, potentially due to the recent rise in interest rates.

The number of homes sold per month is slightly lower than last year, and about 25% of sellers dropped their initial listing prices. Still, nearly 60% are selling over the listing price. Oregon's vacancy rate (the percentage of properties available for purchase) is relatively high at about 8%. This can help drive down prices while making it easier for buyers to enter the market. That said, many are still under construction, which has recently slowed for various reasons, including lumber and skilled-labor shortages.

Will inflation cause the housing market to crash?

When a housing market crashes, it means demand for homes sharply decreases while supply continues to increase. Buying a house is usually considered a good investment, but if the bubble "pops," property values go down. No one can say for certain whether the housing market will crash. And if it does, it won't necessarily be a direct result of inflation.

The reason many people defaulted on their loans during the Great Recession is because they ended up owing more than the value of their homes. But the current market looks a little more promising.

Home loan approval standards are tighter and there’s been a substantial increase in home equity. Both factors make foreclosure less likely.

Should I Get Pre-Approved Before Looking for a House? Read our blog for insight.

Mortgage solutions from our Oregon credit union

If you're considering buying, selling, or refinancing a home in Oregon, our credit union is here to assist. CCCU members have access to a range of useful mortgage resources, including an affordability calculator, a network of knowledgeable realtors, flexible loan terms, competitively low interest rates, and help with each step toward closing. First-time homebuyers can also set up tax-advantaged savings accounts.

Consolidated Community Credit Union serves Oregonians throughout Multnomah, Yamhill, Clackamas, Washington, Columbia, Clark, Skamania, and Hood River counties. With three physical locations in Portland and one in Hood River, plus mobile banking and surcharge-free nationwide ATM access, we make it easy to handle your finances.

We’re also proud to provide our members with access to 5,600+ CO-OP Shared Branches and over 30,000 surcharge-free CO-OP ATMs nationwide.

Join us today or contact us to learn more.

 

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