Portland home sales

This 1,718-square foot home in Northeast Portland's Irvington neighborhood home was listed at $579,900. Real estate brokers say metro-area homebuyers are not likely to be put off by the recent jump in U.S. mortgage rates.

(Gordon Oliver/Special to The Oregonian/OregonLive)

Donald Trump's surprise presidential victory triggered a sudden and unexpected increase in mortgage rates, but those higher home loan costs aren't likely to cool prices in the red-hot Portland housing market.

The average interest rate on a 30-year fixed-rate loan has climbed to 4.10 percent, the highest since July 2015, according to MortgageNewsDaily.com. That's up by about half a percentage point since the Nov. 8 election. The rate of increase matched that of the 10-year Treasury yield, which rose after investors moved billions of dollars from bonds into the booming stock market. Changes in the two rates typically track together.

The Portland area's housing market has been one of the nation's strongest this year. It's topped a list of 20 peer metro areas in year-over-year price increases for nearly a year. Homes routinely sell in a matter of days or weeks rather than months as buyers compete for the slim supply of homes for sale.

The mortgage rate increases aren't likely to break the pattern of strong price growth. What's driving housing demand is job growth, which is bringing new workers to the metro area; generally rising wages in all income categories; and a tight housing supply, said Tim Duy, a University of Oregon economics professor and director of the Oregon Economic Forum..

With those market forces, "we're seeing exactly what you would expect to see," Duy said. In order for price increase to cool, he said, "we've got to be able to build 'up' faster and 'out' faster, and we're not doing either."

Marc Fox, principal broker for Fox Real Estate Network/Keller Williams Realty, said the rise in rates could have the counterintuitive effect of priming the market in the typically slow holiday and winter season.

"We're starting to see some buyers get off the fence," he said.

Though financial markets remain unpredictable as investors try to sort out Washington's new priorities, analysts say further interest rate increases could be in the offing. The Federal Reserve Bank hinted recently that it could raise its benchmark federal funds rate next month. That interest rate doesn't track with mortgage rates as directly as the 10-year Treasury rate, but an increase would signal another move out of the extraordinarily low interest rate environment of the post-recession era.

David Blitzer, chairman of the committee that produces the monthly S&P CoreLogic Case-Shiller Home Price Index -- the 20-city survey that Portland has topped for 11 consecutive months --doesn't expect the latest interest rate increase or further modest increases to dampen housing's recovery.

"The rates are still lower than most people have ever seen them," he said.

Borrowers on the cusp of being able to afford a home can opt for variable rate loans or other cost-cutting mortgage options if rates get too high, he added.

"There's lots of room to dicker," he said.

Portland continues to show the strongest growth in home values of the 20 cities in the Case-Shiller index, which measures relative price changes using repeated sales of the same homes. That increase is more than double the 5.1 percent home-price appreciation for the 20-city composite.

"It seems that everyone wants to move to Portland, Oregon," said Blitzer, a New Yorker. "I'm not sure why."

The RMLS multiple listing service, another measure of housing demand, reported that the median Portland-area home sold for $350,300 in September, an increase of 15 percent from a year earlier. The inventory of homes for sale would meet demand for just two months, a supply measure low enough to indicate a seller's market. The supply of homes for sale hit a low of 1.3 months in March.

Fox, the real estate broker, said homes currently on the market that are priced right and display well continue to get multiple offers, but that fewer buyers are willing to bite on houses that push for peak prices. He worries that the rising prices are leaving behind would-be first-time buyers and homeowners who want to move up to a larger or nicer home.

But today's buyers now have confidence about moving into home ownership and the interest rate bump shouldn't be a deterrent, he said.

"The uncertainty from the 2008 crash is long gone," he said. "Everybody is understanding that real estate is a good long-term investment."

-- Gordon Oliver, Special to The Oregonian/OregonLive