OregonHow cash sent the Portland home market spinning

Californians? New Yorkers? A post-Portlandia feeding frenzy? Nope. Just investors.

Justin and Julieth Buri were about to lose. Again.

This time it was a gold-colored bungalow, a 1,382-square-foot house on Northeast Fremont belonging to the estate of Veona Monroe, a church devotee and the matriarch of a large Portland family.

It needed work, but they were smitten, if not optimistic. Justin Buri, by day an advocate for tenants, knew well the scarcity of Portland houses. They offered $250,000 — $10,000 over the asking price — and crossed their fingers. This time it took a full day before another buyer outbid them, paying all cash. Seven months later, the house sold again, remodeled, for $483,000.

“It was a nightmare,” Justin Buri said of their house-hunting days. From the time those days began in October 2013 until they ended the following May, the Buris were outbid 16 times for homes, many times by all-cash offers.

“Sometimes we wouldn’t even get beat by that much, but because it was a cash offer, the owner would prefer it,” he said.

So goes the story. Cash is king in red-hot Portland real estate, representing a full one-third of single-family home sales last year. Depending on which urban myth you subscribe to, many first-time home buyers are just out of luck either because the Metro-area urban growth boundary makes housing scarce and pricey, or because Portland is so great, housing is being gobbled up by a flood of New Yorkers and Californians racing here for a slice of nirvana. It’s a post-Portlandia feeding frenzy, right?

Well, no. Not entirely.

Investors ♥ Portland (Or why it’s so hard to buy a house here)

Like many cities, Portland is facing pent-up demand by buyers who hunkered down through the recession. Limited supply, new residents, and uncertain sellers are also strong market factors.

But an InvestigateWest analysis shows Portland’s affordability is also being pressured by investors so bullish on this city’s single-family housing they’ve bought properties by the dozen on the heels of the recession, driving up prices and rents as they go.

Traditional real estate investors — flippers, remodelers and developers, companies that to some extent have always been here — have been joined by hundreds of private investors and new private equity firms out to make money for investors through real estate.

The increasing pressure of these buyers in the traditional real-estate market after the Great Recession’s foreclosure sales dried up has helped to distort the Portland real estate market, bidding up prices and making it more difficult for would-be homeowners like the Buris. Once the American dream, home ownership is increasingly a securitized asset that is outside the reach of ordinary Portlanders.

One company, American Homes 4 Rent, exemplifies the trend. The company purchased significant portions of property in communities hit hard by foreclosure before coming to Oregon in 2013. It has since sold hundreds of millions of dollars in bonds to investors, backed by single-family rentals. Other companies designed to generate profits for investors involved include Equity West Capital Partners, a California-based private equity firm that has purchased dozens of Portland-area homes to flip. Dilusso Homes and Portland Development Group, both local remodelers and developers, similarly take cash from private investors in exchange for returns on their deals.

In the greater Portland area (Portland, Vancouver and Beaverton), such institutional investors — buyers of more than 10 single-family homes for cash — bought 6,103 properties between 2011 and the end of 2014, according to data from the real estate information company RealtyTrac. That was nearly 14 percent of all cash sales in the area. And as foreclosures slow, those investors have started to move in on the traditional housing marketplace to compete with the likes of the Buris. The InvestigateWest analysis found 26 institutional investors competed regularly in the listed marketplace, where people in search of their own home typically shop. There is nothing illegal or untoward about that activity — it’s just a new way of doing business.

Lee van der Voo with James Gordon for InvestigateWest

An award-winning investigative journalist and author, Lee formerly managed collaborative journalism projects for InvestigateWest in Oregon. Prior to her work in nonprofit journalism, she spent 10 years in Oregon newsrooms.

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