It began in October. Home values in Portland grew that month as fast year-over-year as the red-hot prices in Denver and San Francisco.

With homes in the region gaining 10.9 percent in value between October 2014 and 2015, Portland had joined those two cities atop a closely watched national report gauging the strength of the housing market in 20 major cities.

But that was only the beginning.



The next month, home prices in Portland posted 11.1 percent in annual gains on the Standard & Poor's/Case Shiller home-price index, putting the city alone at the top. And the streak continued - 11.4 percent in December, 11.8 percent in January, 11.9 percent in February, 12.3 percent in March and 12.3 percent again in April, according to the latest report, issued Tuesday.

Portland's housing market has been the hottest in the country for the last seven months, by the Case-Shiller measure and by others. A new report last week from Zillow found that Portland saw the nation's largest annual decrease in the inventory of bottom-tier homes among the 35 largest metro areas. There are nearly 40 percent fewer homes worth less than $279,200 available than there were a year ago.

And the latest report from the local Regional Multiple Listing Service found that the average home in the region now sells for more than $400,000, the first time the market has reached such heights. The median sale price, similarly, crossed the $350,000 barrier.

So will the Portland market's historic run ever slow down? The cyclical laws of boom and bust demand it will eventually. But the real question - as the city continues to deal with a population boom, a housing-affordability crisis and historically high increases in rents - is when.

"I couldn't even begin to tell you that," said Tim Duy, an economics professor at the University of Oregon. "There's no fundamental law that says it has to end anytime soon. And it won't end until we have more balance between supply and demand in the housing market."

For now, that's not happening. Demand is severely outpacing supply. Between March 2015 and May 2016, the only time the local market hit 2 months of inventory was in November. The figure estimates how long it would take all homes on the market to sell at the current pace; six months represents a balanced inventory and anything below that signals a seller's market. The 1.2 months of inventory the region had in December was the lowest level since at least 1999.

Short of adding more supply, the only other way prices would come down is if they eventually rose so high that demand started to trail off, Duy said.

"There could come a point... when prices can't sustain themselves," Duy said. "But I can't tell you when that is. It's some magic number at some point in time."

There have been signs that the low inventory, high prices and intense competition in the region could be scraping the froth off the top of the market already. Though prices still rose to record levels, April marked the first month since at least last summer that the numbers of closed or pending sales weren't either the most since before the recession or the most of all time. Instead, closed and pending home sales in the region saw a year-over-year decline, a trend that continued in May.

Matthew Gardner, chief economist at Windermere Real Estate, said that unless Portland starts "seeing remarkable wage growth, there's just no way you can keep seeing prices growing in the double digits."

Gardner predicted that sometime in the fall, Portland will experience a "leveling off of that annualized price growth."

"The rate of growth will slow," he said. "And I'm very comfortable with that."

The Case-Shiller numbers lag two months behind the current market, Leslie Jones pointed out. Jones, principal broker with Re/Max Equity Group, said her team of realtors has noticed a "very slight shift" in the market in recent weeks; homes are still selling quickly, but "it has been feeling for the last two or three weeks like houses have been staying on the market longer," Jones said. And more of her agents have been getting buyers under contract rather than being outbid.

"It feels good to me," Jones said.

International politics might be adding fuel to Portland's housing fire, too. The economic uncertainty stemming from the United Kingdom's vote last week to leave the European Union caused investors worldwide to flee the stock market in favor of more reliable - but lower yielding - treasury bonds, which puts downward pressure on interest rates and makes mortgage borrowing more affordable, said Brian Allen, a longtime broker and the head of Windermere Stellar.

But as long as competition and pricing remain high and supply low, buyers - especially first-timers - will continue to experience a frustrating market, according to Gardner.

"It's very hard for them to even afford to get an entry-level house. ... The move-up buyer sells to the first-time buyer in order to move up," Gardner said. "Those move-up buyers aren't finding anything to buy. And because they can't find anything to buy, they're not listing their house for sale. So you kind of get in a chicken-and-egg situation."

-- Luke Hammill

lhammill@oregonian.com

503-294-4029

@lucashammill