Approximately 250,000 homebuyers owe more on their home than they could sell for today.
Is this cause for concern - does in mean there's a real estate market crash in Portland and around the country?
First, note that most of these buyers purchased in 2022 shortly before interest rates more than doubled in just a few months, with little or no money in their downpayment.
As such, with just a 1-4% drop in values, for example, buyers on VA, FHA and certain Conventional loans might have "lost" their down payment to reductions in home values. This is a risk of small down payments, and while it's not worth ignoring that these folks are in this position, it's also worth noting a couple other things:
1. it's a small number of homeowners as a percentage of the whole;
2. the majority of buyers in 2022 aren't in this position;
3. we could see 25-40% reductions in value before going back to pre-pandemic home values.
This adds up to: this isn't a sign of big trouble ahead.
Buyers from 2022 aren't likely looking to sell in 2023, so the reduction in home value is only an issue on paper.
By the time they are ready to sell in 2025 or later, they will most likely be back in the red.
Headlines that shout stats like the 250k grab attention, which is their sole purpose. They don't, however, help to tell the whole story.
If you or someone you know are worried that your home in or around Portland, Oregon is underwater, reach out and we can discuss it. Again, though, if you don't plan to move, it's a short term issue that will work out in the long-term. This has always been the case with real estate and there's nothing to suggest this is different.
