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In reviewing the 2012 Portland, Oregon real estate year it's important to remember three important factors that weighed heavily on Portland's real estate climate.

1. Interest Rates

The home borrowing interest rates stayed at all time lows around 3.5% throughout most of the year. This lead to consumers being able to purchase up while keeping there payment the same or in some cases purchasing a more expensive home actually lowered their overall payment.

These low interest rates also attracted millions of refinances of heafty debt freeing cash strapped families from some monthly payment burden giving consumers more confidence. Consumer confidence leads to more purchasing.

Investors certainly benefited from these low interest rates. The problem for many investors is that there was very little inventory so if they wanted to get a deal they had to skim their profit margins a little more or bank on the appreciation that occured or just plain do less deals.

2. Inventory

Inventory continued declining for most of the year and ended the year at 3.6 month or 6352 units. By the end of the year inventory was as low as it was in August of 2006 and the last time the inventory was lower than 3.6 months was 7 years ago in December of 2005.

With Inventory sharply down from year 2010 to year 2011 to year 2012 the time it took for a home to sell (marketing time) also decreased significantly by about 21% to an average of 112 days. The 112 days is the length of time it takes from when a home goes live on the multiple listing service to when a home has an accepted offer. In 2011 the marketing time was at 143 days. This is a big drop.

With the low inventory, low marketing time, low interest rates and increasing consumer confidence it lead to homes and Sellers being able to raise prices.

3. Appreciation

Homes appreciated in some areas 7-8% while the overall Portland Metropolitan Area market had homes appreciating around 4.4% on average. The average sales price for January - December 2012 was $275,000. This number is up $11,700 from January - December 2011's average sales prices of $263,300.

With signs that the Portland market started it's first year of recovery or at least gaining some steady month to month appreciation investors, first time home buyers and move up buyers were all ready to use those low interest rates to purchase real estate.

Real estate has always been a great hedge against inflation and with the market appreciating real estate can be a terrific investment to leverage, especially when the cost of money is as low as 3.5%. Everyone knows that interest rates will at some point slowly, incrementally move higher so many buyers are wanting to lock in now as they don't feel the interest rates can get any lower.

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