Subtle market changes: Bend still on seller's side but inventory up

             At midway 2024 the Bend real estate market appears to be tracking the previous year, but with hints of changes that could portend more dramatic future shifts.
            In looking at the 12 months ending June 30 against the previous year, the most noticeable, although subtle, change is in the slowly increasing inventory of available homes.
            Bend is still a seller’s market, albeit not to the extreme of the past few years, but inventory has steadily increased over the year.
            At the end of June 2024 Bend’s inventory of 454 single family homes listed for sale on less than had increased to 3.5 months, according to the Beacon Report compiled by Beacon Appraisal of Redmond from statistics available through the MLS of Central Oregon. That represents an increase of 1.5 months from the comparable 12 months ending June 30, 2023 when there were 313 listings.

            Markets are considered more balanced when there is a 4-6 month supply of homes for sale.
            This is the largest months of inventory, calculated by averaging 12 month sales against current listings, in the several years going back to the beginning of the Covid pandemic.
            Although total sales for the 12 months dropped to 1,534 compared with the 1,741 the previous 12 months, it’s notable that the percentage of homes selling at more than $1 million increased to 25% from 22% the previous year.
            The median price of homes through a cumulative12 months ending June 30 was $735,000, up 6.44% from $690,500 the same period 2022-2023. For a single month of sales the median high for the year was $800,000 in July of 2023. The monthly low was $682,000 in February.
            In Redmond, Central Oregon’s second largest home market, the median for 12 months rose to $510,500 from $460,500 in 2023, an 8.5% jump.

            Redmond’s inventory tracked in lockstep with Bend, with 2.0 months supply in 2023 increasing to 3.5 months for the 12 months ending June 30 this year. Redmond total sales dropped from 652 to 625 for the 12 months.
            The Market Action Index report by First American Title for July 8 concluded that, “The market has been cooling over time and prices have recently flattened.”
            But, the MAI report noted, “we’re still in a Seller’s market (where significant demand leaves little inventory available).”

Post pandemic: Bend housing prices level, affordability problem remains

             It’s a challenge digging into Bend real estate market numbers to unearth any breakout trend from most recent months and longer.
            Median sales prices for single family homes on less than an acre continued to rise, although at a pace much less than the “pandemic era” that ran from early 2020 into 2022.
            For the 12 months from May 1, 2023 through April 30, 2024 the median sale price was $738,500, or 6.95% more than the same period of 2022-2023. During the most recent 12 months, closing prices ranged from a monthly low of $682,000 in February of this year to $800,000 in July of 2023.
               Bend’s inventory of available continues to stay on the seller’s side of the market, with only a two month supply for the 12 months ending April 30 as calculated by averaging sales for that period.

            What has emerged – as noted in recent market reports by Beacon Appraisal Group—is the percentage of homes selling at more than $1 million.
            In February of this year nearly 25% of single family sales topped $1 million. That was also noted in the Beacon Report for April, albeit the share had declined to 20%. And for the 12 months ending in April the 404 sales at more than $1 million accounted for more than 25% of the total 1,591 closed. The full Beacon Report.
           The upward price trend in both median prices and sales above $1 million only serve to point out Bend’s growing housing affordability problem for a workforce whose median household family income is about $88,000 according to 2021 US Census statistics.
            When plugged into Zillow’s home affordability calculator, that would enable a household with the median income to purchase a home for about $508,000. In the 12 months ending April 30 there were only 215 sales under $550,000, or 13.5%. And as of April 30 only 16 of the 310 active listings were priced under that amount.

            Another market segment getting attention in Central Oregon is apartments, where an active construction trend is creating many newer units and driving the vacacy rate to 7.87% according to data from leading brokerage Compass Commercial. That is second only to the Boise market with 10.6% vacancy rate.
            Bend/Central Oregon’s average rental rate tops all of the nine cities in the Compass report at $1,740, leading Portland at $1,619 and Boise at $1,537 per month.
            The report also includes numbers for Eugene and Salem as well as the Richland area of south central Washigton along the Columbia River.
            An earlier report by Compass at year-end 2023 noted that thousands of new apartment units would be completed in the following two years. At the end of Q1 this year Compass estimated about 500 apartments were available for rent.
            One key question raised by the construction boom is whether the increasing glut of new units will dampen demand and force rental rates downward. Already multi-family owners are offering such incentives as free months of rent and move-in credits.
            Also noted in the rental sphere is an increasing number of  permitted short term rentals being listed for sale. This might be partially attributed to owners anticipating several larger projects being brought to market that will have no restrictions on the number of short term rentals, or conversion from rental unts to condominiums.
            Two of these new projects, Jackstraw and Everpine, in the area between the Old Mill District and downtown core, have together received more than $18 million in 10-year tax breaks from the city. Facing a backlash, the City Council has paused further tax breaks for new projects to review the program.
            The prospect of the city subsidizing through tax incentives  projects that developers could sell at market rates would likely do little to ease the city’s housing affordability issues.
            One argument has been made that the tax breaks might be tied to requirements that multi-family projects permitted as “residential units” in planning applications be restricted to rental units for a defined number of years before conversion to condos or townhomes. This would require an amendment to the Bend Development Code.

Bend’s Development Code in Conflict with Housing Goals

 Note: This post first appeared as a guest column in The Bend Bulletin, April 14, 2024. Photos of the projects mentioned have been added.

            Bend elected officials and city administrators all say they’re working diligently to create more housing in what is in the top tier of Oregon’s fastest growing cities.
            Now a proposal for new multi-family housing in the middle of a single family neighborhood is bringing to a head some of the arguments that swirl around where new housing should be built. It has also highlighted deficiencies in the Bend Development Code that could allow units thought to be for apartment rentals to be individual condos or nightly rentals - even before a building is occupied.
            At first glance the opposition to the proposed Compass Corner mixed-use project at the north end of NW Awbrey Road might be dismissed as a typical NIMBY attitude of nearby residents. And a resident presenting himself as leader of a stated housing activist group, Bend YIMBY, has spoken in favor of the project.
            The project is proposed as a four-story structure with 40 plus apartment units and a lower floor of “Convenience Commercial.”  Nearby residents of single family homes are opposed to the building scale and design aesthetics covering most of a 1.02 acre site. These objections are not considered factors in city planners’ interpretation of the BDC, which is weighted heavily to encourage more dense housing.
             But a greater concern with the Compass Corner project is that the code allows them to be transitioned from permanent apartment housing to a wide variety of lodging—including short term rentals.

Compass Corner aerial illustration

            This possibility emerged in the city planning department review of the Compass Corner proposal that responded to several of more than 250 opposing comments prior to a public hearing April 4.
             The planning staff final report and recommendations emphasizes that the developer could complete apartment units, then apply to change the use to lodging by filing a “Change of Occupancy” request with the city’s Building Safety Division.
           Is it possible the developer, whose principals already are Bend hotel owners, might take this opportunity? Although a representative has said this is not the intent, it remains a possibility.  What would this do to create permanent apartment housing if that happens? 
            And the implications of Compass Corner extend across the city.
            Consider the more than 300 units now under construction as the Jackstraw project along NW Arizona south of downtown, and another 246 permitted in the Everpine complex nearby to the south of there. What would be the impacts if the same standard applied to Compass Corner is used for those much larger projects?

Jackstraw under construction

            Several Bend Bulletin articles describing Jackstraw and Everpine have referred to them as apartments for the rental market. This is the impression left with much of the public.
            However, city planners note that the different zoning classifications for Compass Corner, compared to Jackstraw and Everpine, nevertheless permit individual ownership of “residential units” in that each provides for mixed residential and commercial uses.
.           This loophole in the BDC runs counter to any effort by the City of Bend to ensure projects expected to be full time residential apartment units will remain as such. It opens the way for a patchwork of nightly lodging interspersed with permanent housing throughout various zones within the city.
            One step could be a code amendment that requires development applications to clearly define the “residential” use after construction. If the use is for apartment housing then the project should be restricted to apartment rentals for a defined number of years.
            A code that is open to ambiguous interpretations and provisions conflicting with city objectives is a rocky path to achieve more housing at the expense of wider public support.
            This is an opportune moment for planners and the City Council to add clarity to a development code that has apparently had conflicting and unintended consequences for Bend housing goals.
            Any housing, any place, at any time with few restraints is not workable for the future.

 

Lee Hicks is a resident of Bend, and a former wire service, weekly and daily newspaper journalist and newspaper owner- publisher.

 

Is a generational divide joining interest rates as factor in housing?

             Are younger potential homebuyers stuck with renting their home or condo - with scant chance of finding something affordable to buy??
            Could it be that grandma and grandpa – and maybe mom and dad – are locking the kids out of the housing market?
            That along with mortgate interest rates that have been stuck above 6% for some time are often blamed for the shortage of homes available for a younger generation dreaming of a place of their won.
            By some theories, an equity rich older generation is either staying put in their homes or selling and rolling the cash into another home, thereby driving up prices and competition for buyers, and squeezing more affordable inventory out of the market.
            In some cases retirees may be splitting that equity between a couple, or more, places—maybe a condo in Palm Spings and a smaller house Bend, after escaping the urban turmoil and traffic of Seattle, San Francosco or Portland.
            All that said, let’s take a look at the Bend real estate market for the 12 months of 2023.
            The Beacon Report complied by Beacon Appraisal Group of Redmond, OR and a continuing weekly Market Action Index distributed by First American Title together offer insights into where the market is now, where it has been and maybe where it could be heading.

            On a rolling 12-month basis median prices for single family homes in Bend on less than an acre rose a modest 1.24%, to $732,000 from $723,500 for the comparable period of 2022.
            Total sales dropped to 1,565 for the period, with 208 homes listed at year end, equating to a two-month supply of homes for sale based on the average of the past 12 months. That remains considerably below what professionals say is a balanced market of 5-6 months inventory. By comparison there were 2,033 sales in 2022 and 226 listed at year end, translating to an inventory then of only 1.5 months.
            In Redmond, Central Oregon’s second largest home market, median prices dipped from $512,000 to $486,000 for the 12 months, $26,000 or 5.08% under 2022. Redmond’s total sales sank from 782 in 2022 to 598 in 2023, with 134 homes available, or a  three months supply. That represents an increase from two-months inventory at the end of 2022.       

   Some observers say the marginal differences in year to year  median prices and inventory are reflective of a national trend wherein sellers are staying put and new home building doesn’t match potential demand. The inventory keeps the market balance on the
sellers side, except fewer owners are selling.
            That’s the conclusion in the January 24 Market Action Index snapshot of Bend housing by First American Title, which has Bend moving slightly more into a sellers market which could mean more upward pricing pressure.
            In Bend the lack of more affordable houing in relation to median incomes has led to a push to create deed restricted workforce housing. In some situations, employers are participating with non-profit housing groups to improve inventory.
            Local initiatives dovetail with an aggressive housing initiative backed by the Oregon governor, with some bipartisan legislative support. That would potentially loosen state funding that could improve affordability through incentives for entry and mid-level housing construction.

A mostly static market: But million dollar sales on rise

             With more than half of 2023 behind us the Bend real estate market trends appear to be tracking much the same as with the past few years --- from the pandemic boom and the ensuing spillover in 2023 and 2022.
            But listing prices are often being adjusted downward– rarely the case in the recently overheated market. Open houses have also proliferated, when before many single family homes would hit the MLS of Central Oregon as pending sales within days of a listing
agreement.
            Other key markers in the August report by Beacon Appraisal based on MLS statistics:

 

·         Inventory as calculated by averaging sales of the previous 12 months continues in a tight range of about two months.

·         Median single family home prices on a specific monthly basis continued to hit new highs in June, $785,000,  and July, $800,000, after falling to $660,000 in February from a high of $773,000 in February of 2022.

·         Even with a new monthly high price, on a rolling 12-month basis the median closing price at the end of July was $690,500, down $12,000 or 1.71%, from the previous 2021-2022 period.

            As widely reported across the country, prices in traditionally more heated markets have continued to hold well above pre-pandemic levels, with some moderate downward adjustments as noted in Bend.
            The overarching factor, the consensus appears, is continued high interest rates reaching 7% for a 30-year mortgage. Existing owners are reluctant to sell when they may have loans of 4% or less, thereby squeezing inventory while new homebuilding has not kept up with demand.
            When existing owners do sell, they’re holding years of built-up equity and may push prices higher with the extra cash when they buy another home.

            One trend noted in the Beacon Appraisal report is a rise in Bend sales above $1 millon--46 of the total 141 sales, or about 32% in July. And inventory at the $1 million plus level was only two months. For the 12 months including August of 2022 through July 2023 there were 381 of  a total 1,705 sales above $1 million, or more than 22%.
            However, the report said inventory for sales in the $1.6 to $1.8 million range stood at five months, and above that price level at six months.
            A report by First American Title Company provides another snapshot of the Bend market. As of August 16, the FATC Market Action Index categories Bend as a “slight seller’s market.”

            “In the last few weeks themarket has achieved a relative stasis point in terms of sales to inventory. However, inventory is sufficiently low to keep us in the Seller’s Market zone so watch changes in the MAI. If the market heats up, prices are likely to resume an upward climb,” the report concludes.
            In Redmond, Central Orgon’s second largest housing market, the Beacon report shows a median price increase from June to July from $473,000 to $500,000, but below the $542,000 monthly peak in August of 2022.
            On a rolling 12 months through July the median as $470,500, down $21,000 or 4.27% from the same period of 2021- 2022.
            Overall Redmond inventory, as in Bend, was approximately two weeks but jumped to seven months in the $600,000 to $700,000 category and six months in the $550,000 to $600,000 range, Beacon reported.