Portland's city core seeing a slow-down in rent growth
PORTLAND, Ore. —
Portland’s housing market was once one of the hottest in the nation; rents were skyrocketing. They still are going up, but there appears to be some signs of a slow-down in how fast apartment rents are rising in one part of Portland.
According to the February edition of Portland State University's Center for Real Estate Quarterly, the effective rent growth rate for an apartment in Northwest Portland is slowing down. To a lesser extent Northeast Portland is seeing it too. What does that mean?
“[It] doesn't necessarily mean rents are going down, what it means is that the rate at which they are growing is decreasing,” said Carlo Castoro, a realtor in Portland.
In the last quarter of 2016, there was a 1.6 percent decline in rent growth rate in Northwest Portland. In Northeast Portland, a decline of 0.5 percent. The long-term average is 3 percent growth in Northwest and 3.7 percent growth in Northeast, according to the report.
Castoro says the reason behind the negative growth rate can be explained by an Economics 101 concept: supply and demand. The supply in Northwest Portland was bolstered by new buildings.
“There have been, what we call in the industry, deliveries in that market,” Castoro explained. “What that means is that there are a lot of new apartment buildings that have been built [in Northwest Portland] and are now accepting residents. It's just the basic function of supply and demand. Where you have more supply of apartments and demand has not met that supply, it puts a downward pressure on prices.”
Essentially, he says, they hit their peak in Northwest. Castoro added that there are cycles in every market.
Move outside the Portland city core, and you’ll find the opposite end of the spectrum. In East Gresham at the end of 2016, effective rent growth rate was 8.1 percent, in Milwaukie it was 8 percent, in Vancouver it was 7.2 percent. For the whole year, East Gresham’s rent growth rate was 11.2 percent. It’s usually closer to four.
What does the future hold for Portland? Castoro says you will probably see rents continue to rise. He expects the growth rate to bounce back in Northwest. Long term, rent growth is expected to be between three and four percent.
And while rents are expected to continue to rise, new people are expected to keep flocking to Portland and fill new apartment buildings. Castoro says you can look to Northwest Portland to see that in action.
“Slabtown is a brand new neighborhood that was just built in Northwest Portland, that is going to continue to grow. The Northwest industrial neighborhood is a brand new neighborhood in Portland that is going to continue to grow,” he said.