As we work our way through the first quarter of 2026 there’s no shortage of news in the world. If you stop to consider how this all relates to the real estate market, here’s an answer.
Caution among buyers is still the most prominent feature of our real estate market, most of the time. There are times when a home attracts multiple offers and there is competition among buyers for a certain property. Most of the time, especially in the “upper” price ranges (the “upper” threshold varies depending on where you are), the buyer and seller are negotiating one on one.
However, one day we will look back on this time and wonder why we were worried about the market. There are several factors that maket it obvious a strong real estate market is about to occur.
1. A Supply-Demand Mismatch
We are currently operating with a level of housing turnover that is lower than what we saw during the Great Financial Crisis (GFC). While that might sound scary, the underlying fundamentals are actually the opposite of 2008.
- Population Growth: The Portland Metro area has 20% more people today than it did during the GFC.
- Underbuilding: The GFC saw extreme underbuilding, which was understandable. Now, despite population growth, building permits remain at levels comparable to the GFC era.
- Housing Turnover: Total housing turnover is at a historic low of roughly 27 per 1,000 units. While this level fluctuates, this level is typically seen in the high 30’s to as much as 55 or more per 1000 units.
Essentially, we have a build up of more people competing for a relatively small number of homes. A likely catalyst is interest rates. When they are at acceptable levels for long enough for buyers that buyers can notice the improvement and start their process, the market will additional demand will begin to hit the market.
2. Two factors: the increasing age of first time home buyers and the relative wealth of the baby boom generation.
- First-Time Buyers: The median age of first time home buyers is typically in the low 30’s However, in recent years this number has increased and in 2025 the median age was 40 years old! At some point, those in their 30’s will want to resume their traditional home buying pattern resulting in a huge increase in demand. There are currently nearly 50 million people in their 30’s in the country.
- Market Share: First-time buyers only make up 21% of the market, far below the historical norm of 40%.
- The Help Factor: There has been a gradual increase over time of family assistance of first time home buyers, first timers using inheritance money, or an increasing trend of multigenerational living. These factors don’t appear to be abating any time soon, resulting in ongoing increasing demand.
3. The "Spread" is Normalizing
For the last few years, mortgage rates have felt unreasonably high compared to government bonds. However, that gap is finally narrowing to more typical levels.
- The spread between the 10-year Treasury yield and Mortgage-Backed Securities (MBS) has slowly been coming down.
- Historically, this spread sits between 1.5% and 2.0%; it has currently cooled to 1.9% after years of volatility.
- As this spread stabilizes, mortgage rates are trending in the right direction, recently dipping toward the 6% mark.
4. Metro Area Economics
2025 started out tough for jobs but by the end of the year there were actually more jobs than there were at the beginning. Now as we’re about to finish the first quarter of 2026 jobs appear steady. The future trend could go either direction, but for now looks solid. A few facts:
- Population Shifts: While Multnomah County has seen a people moving out since covid began, it is now a great place to go for those seeking good value. Restaurants and walkability are also strong in many parts of Portland, two factors buyers appreciate.
- Conviction: According to surveys over 60% of people consider home ownership to be a good financial move. While this metric fluctuates based on whether the market seems strong or weak, the resilience of the number is steady.
The Bottom Line
Currently, 20-30% more volume could be added to today’s market just to get back to what we consider "normal" levels of sales, and it’s been that way since the middle of 2022. If rates move lower that is the most likely catalyst, which would likely be the result of lower inflation. Other positive economic news could result in these positive outcomes as well. One thing seems relatively unmistakable, it’s better to buy before the market heats up rather than after it heats up, so it’s good to plan accordingly.