A Snapshot of the Pacific Northwest Multifamily Housing Market

Inflation and the Multifamily Market in the PNW. While the economy is growing, inflation has become an increasing concern, averaging more than 5% year over year (YoY) each month since late spring 2021. In the month of November 2021, inflation grew a staggering 6.8%, which is the highest inflation rate seen in nearly 40 years! Given the robust demand for housing so far this year, it appears that upward price pressure for both rental and for-sale housing will continue as overall housing shortages escalate in the Pacific NW. There are multiple pricing pressures on for sale housing; new regulations for energy efficiency, supply chain delivery issues, overall product availability and finally the increase in mortgage rates. These pressures will drive even more potential homeowners into the rental housing market and the results will be decreased availability followed by a continuing escalation in rental rates.

New trends are emerging. During the early days of the pandemic, many tenants fled expensive, densely populated, urban city centers for less expensive and less dense suburban locations. In late 2021, many of these urban markets have started to rebound. Portland is one of those markets beginning to rebound, however, the continuing political atmosphere and increasing crime have prevented the city’s urban core occupancy from trending upward as quickly as other city centers. New trends in rental criteria are also emerging; the ”3x the rent income standard” has given away to 2.5 or 2x the rent as the new income standard. Wages have increased but not as quickly as rental rates. Increased delinquency due to a lessening of the income criteria has not materialized, likely due to the eviction moratorium regulations and timelines drop dropping off.

Looking Ahead. While inflation is affecting physical property expenses as well as onsite wages, driving up overall expenses, the unprecedented levels of demand for multifamily housing continues to increase revenue, creating robust apartment market projections through 2023.