Home Buying in Oregon

Single-family homes dominate Oregon, representing nearly 68 percent of housing stock. Legislators radically changed zoning in 2019 to allow widespread construction of apartments for the first time; laws previously restricted 77 percent of the land to single-family housing only, rules that discriminated against and disenfranchised people of color.

The state has fallen behind in housing construction since the 2008 recession, and low-income households in Oregon have suffered disproportionately. A report shows Oregon's lack of affordable housing is dire and only marginally better than the situations in California, Utah, and Colorado, which are blamed for escalating homelessness. The state is 140,000 housing units short of the current need and must build 555,000 units to meet the need over the next 20 years.

Oregon's population is holding steady, but the shortage of available homes and current homeowners' reluctance to sell during a period of high interest rates are pushing prices higher. Adding to the complex issue is the fact nearly one-third of Oregon home sales in Hillsboro County, west of Portland, are to investors, a phenomenon that is making housing unaffordable. In Portland, the average home price is $547,000, and in Eugene, it is $530,000, both well above the national average of $416,000.

The median household income is more than $80,000, at least $6,000 above the national average.

Oregon does not collect sales taxes, but has the fourth-highest property taxes in the country, along with high gasoline and cigarette taxes. One county, Multnomah, taxes the wealthiest residents to provide free preschool to all residents. Taxes vary by county.

A national magazine ranked Portland, Oregon's quality of life as 44th in Best Places to Live and 77th in Best Places to Retire, citing the combination of serious fun in the city and highly educated residents. The state's cost of living is high, and unemployment is higher than the national average. A state government survey showed one in three people spends more than half of their income on housing. Despite being a youthful, progressive city with lots of parks, most in Portland commute by car for 30 minutes a trip.

Homelessness, drugs, and crime are the three biggest concerns for Oregon residents. Yet access to outdoor spaces and public education are easy to come by.

Home sales in the Portland area have cooled somewhat, with houses on the market about 35 days before selling. A regional magazine shows prices are dropping due to a lack of interest from buyers in that area. However, home prices in Eugene are slowly appreciating (2.5 percent or lower year over year), but they have a similar time on the market before selling.

Prequalified buyers with a 10 to 20-percent down payment ready will have their offer accepted in this seller's market. To qualify for a mortgage, you need a good work history and a credit score above 600 (it can be lower if you have a 20 percent downpayment.) A credit score is based on your payment history and your income-to-debt ratio.

A quarter of homes in the Portland area were built prior to 1940, and another 25 percent were constructed by 1970, so the majority of homes that buyers see are older, with many renovated at least once. Quaint bungalows and Victorian-style homes bookend neighborhoods of single-story ranches throughout the region. Lush landscaping is paired with tall spruce and cedar trees that provide privacy among closely set homes.

Near Medford, a city in southwestern Oregon, small unincorporated towns of Beagle and Brownsboro may offer lower taxes. Still, seeking homes for sale there is challenging: counties may set zoning for lot sizes, such as a 5-acre minimum, and records of permitted renovations could be scant due to the lack of local government. Homes in unincorporated areas are sparse, so there are fewer to choose from when house hunting. It's also difficult to develop a sense of comparable sales because so few are listed in the area.

Each of Oregon's 36 counties sets its own property tax rate. Josephine County, in the southwestern corner of the state, charges only $7 per $1,000 of valuation, but low taxes come with additional costs: a media report says more than 200 inmates of the county jail were released because the jail did not have enough funding to hold them. Property taxes fund all county functions, from libraries to law enforcement, teachers, and street sweepers. Clackamas County pays the highest taxes, averaging more than $4,000.

It's important to assess an area's climate before committing to a home purchase. Will you be in the area long enough for a purchase to make financial sense, or is renting a better option?

Oregon home prices are appreciating gradually, about the same as the national average of 2 percent. Whether your investment in a home will break even when you move on usually depends on the length of time you own the property, but there are many other factors as well, including the national economy.

Renting an average $2,200 condo for a couple years is a better option than purchasing a $350,000 home with a 20 percent down payment. However, after four years, the rental starts costing more, making purchasing a long-term home the more cost-effective option, especially in a high-demand area.

Partnering with a local realtor enhances your ability to find a home with the right qualities. A buyer's agent listens to your priorities, understands your budget, and sifts through listings to show you the best matches. That person will also help you create a strategy for purchasing a home, including writing your offer and negotiating the price. Keep in mind that a buyer's agent is paid a fee negotiated with you directly.

Your buyer's agent should have research ready on each property's price history, the pros and cons of the local area, and insight on taxes and services. They will help hire an inspector, renegotiate the price if there are significant issues, and keep the closing process on track.

About 13 percent of Oregonians live within HOAs, and the average monthly fee is $490. It's critical to understand the membership fees and bylaws of the organization in your community before making a home purchase. If fees are unpaid, the HOA can foreclose on the delinquent owner.

It's easier to get a mortgage when you have a large down payment, but you need a good credit score and a significant salary, too. A single buyer making Oregon's median $60,000 annual salary with 20 percent down on a $300,000 home may not be approved for a 30-year, $240,000 mortgage because payments would be about $1,700 per month. Lenders won't allow most buyers to take on a mortgage that's one-third or more of their annual income. If you can lower the mortgage amount by borrowing from family members, you may qualify. Closing costs are usually 2 percent to 5 percent, or an additional $6,000-$12,000, which is also expected in cash.

Shop around for the best mortgage terms. If a local bank has a history of working with you, they may extend special benefits to get your mortgage business. Compare your bank's offerings to those of a mortgage broker who has access to a wide variety of mortgage options. A decision may hinge on your knowledge of and comfort level with the mortgage industry.

Your income-to-debt ratio and your history of on-time payments are critical to qualifying for a mortgage. Your credit should be above 600 for government-backed loans and above 640 for other mortgages. A high credit score can lower your downpayment requirement and lock in a better interest rate. Start early by requesting free copies of your credit report from the major agencies (Experian, Equifax, and TransUnion) and checking them for errors.

Fixed-rate mortgages are good if interest rates are low, but less desirable if rates are high (the rate is currently above 7 percent). Adjustable-rate mortgages are riskier because the interest rate can change during the loan's term. Jumbo mortgages allow wealthy buyers to borrow more than the federal housing authority limit, about $766,000, in areas of particularly high property values.

Mortgage options include these government programs:

• Oregon has special programs that help with down payments and mortgages for first-time homeowners.
• FHA mortgages are tailored for first-time buyers with down payments of less than 5 percent.
• Rural properties may qualify for USDA loans, especially buyers with low incomes, but good credit scores.
• About 7 percent of Oregonians are veterans. Military veterans and their surviving spouses may seek a Veterans Administration-underwritten VA loan. These mortgages do not require PMI and may be used multiple times by qualifying individuals.

Extreme weather is not a big factor in home purchases in Oregon, but wildfires may be. The state publishes a wildfire risk map that describes the probability of destructive fires by region. Oregon requires insurers to cover wildfire damage to homes.

The average American homeowner pays about $2,200 per year for property insurance. In Oregon, it's nearly half that amount, $1,200. The state's mild climate and lack of serious storms mean homeowners insurance is significantly more affordable here than in the rest of the country. The state does not require homeowners insurance, but mortgage lenders usually make it mandatory. A mortgage lender will require both homeowner's insurance and mortgage insurance, called PMI, to protect their interest in the property. PMI is calculated according to the mortgage borrower's credit score, usually $1,300 to $4,500 per year on a $300,000 mortgage. This is in addition to your mortgage payment.

Home buyers will want to consider additional insurance for barns, fences, and garages, which are not covered unless specifically noted in their policy. Valuable personal possessions inside the home are also unlikely to be covered by insurance unless an additional rider is written.

Beware of the latest real estate fraud in Oregon. There have been reports of sophisticated scammers having planted malware in realtors' computers, allowing them to read emails about upcoming sales. Posing as the realtor's colleague or a representative of the title company, the scammers instruct buyers that their down payment should be wired to a different account. When the buyer complies, the money is stolen.

Owning your home makes you more secure against rent increases and related unplanned moves, but it can be a challenge, too. Market fluctuations can make it hard to sell, and your job or other prospects can make you transfer without much notice. Since properties are appreciating at a modest pace, a home purchase should be a long-term commitment to realize a profit on your investment. Remember, if you move and decide to rent your property, your mortgage will be affected because it will no longer be your primary domicile.

Keeping a property in good condition, including addressing any structural or systemic issues, protects your investment.