#23 – Market Predictions for Portland, OR from the American Monetary Association

Portland, OR: -0.6% Return on Investment (2011)

Portland experienced a cyclical expansion of market values similar to many other areas, and saw a subsequent decline after the financial crisis of 2008.  The market showed signs of stabilization in 2009, but has subsequently resumed a downward correction.  Values in Portland are regressing toward a more linear growth trajectory.  Currently, approximately 42% of listings in Portland are from foreclosures[1].

Investment in the Portland market continues to be a difficult proposition, due to the rent revenues  that remain low relative to market values.  This means that investors will need to subsidize monthly negative cash flows in the hopes that future value appreciation will be sufficiently large to absorb the accumulated losses when the property is eventually sold.  The natural beauty of Portland and the Pacific Northwest represents one of the great traps that income property investors can be pulled into.  This trap is buying in a place that you would like to live, without incorporating the fundamental economics of the area into the equation.  Portland is an excellent place to live, with great variety in restaurants and entertainment, along with many activities that are friendly to families.  However, being a good place to live does not necessarily make the market a good place to invest.

With the state and city experiencing budget difficulties, Portland and Oregon are expected to pursue increased taxes over the coming years.  In addition to this, Portland and the Pacific Northwest in general tends to be heavy on land use regulation and other restrictions that impede investors.  These regulations constrict development and inflate prices for existing properties.  This ends up producing negative cash flows that can only be offset with leveraged appreciation.  This strategy can be extremely risky since the negative cash flows must be continually absorbed while investors are waiting for a value expansion to materialize.  There are many other markets with fundamentals that make them far more attractive areas for investment than Portland.

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