A
widely followed report on the Bend and Central Oregon real estate market through
the 12 months ending October 31 is out.
And…drum roll…parsing the statistics
leads to no observable dramatic changes, albeit there are signs that sales could
be reflecting uncertainty over such factors as rising mortgage rates, tenacious
but wavering inflation and possibly a recession on the horizon--or maybe not.
All told, Bend’s market appears to
be faring better than elsewhere in the country including the marjor metro
centers of the Northwest, where pricing and sales volumes are beginning to mirror
the overarching macro economic challenges. But Central Oregon real estate went
south, and fell deeper and later than other areas in the last recession.
It may be time to hang on and hold
your breath.
In the new report from Beacon
Appraisal Group, the median price of a Bend single family home on less than an acre that
sold in October was $680,000, the first time since January that the price dropped
below $700,000 and a 6.2% drop from the month before. The high monthly number
for the year was $773,000 in March.
Beacon’s statistics are based on the
MLS of Central Oregon database.
On a rolling median for the past 12
months, the median sold price was $723,500 – 15% ahead of the $631,500 for the
same months from 2020 to 2021.
In the past 12 months there were a
total of 2,177 sales, while at the end of October 327 homes were listed on the MLS
of Central Oregon. Averaging the 12 months of sales over the period translates
to approximately a two-month inventory of homes on the market.
A more balanced market is considered
four to six months supply, but the October inventory still represents double available
listings compared to the same month of 2021, and substantially above the paultry
0.3 months in January of 2022.
Redmond’s inventory mirrored Bend, at two months, based on 842 sales for the past 12 months and 135 active listings at the end of October.
Some indications of current market conditions locally and nationally:
-Many economists warn that a recession is coming in 2023, but don’t agree how severe it could be. Others are not so sure and the White House says if one is on the horizon it would be mild.
-Mortgage rates for for conventional 30 year terms are now locked firmly above 7% or higher. That’s the highest in two decades and eclipses the annual average of only 2.96% in 2021. There are signs the Federal Reserve will hike again before year-end but perhaps not the 75 basis points that’s been the norm this year.
-The last year the annual rate average topped 7% was 2000, when it was 8.05%, still substantially below the monstrous 16.63% in 1981.
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| First Amerian Title Bend report |
-Accelerating rates have created turmoil in the mortgage bond market. Real estate investment trusts (REITS) that are highly leveraged are facing margin calls depleting their cash reserves, as the Fed and major banks leave the market and thereby shrink demand.
-Homebuilders are scrambling to adjust production to meet already sagging demand from interest rate and inflation factors. New home prices in Bend are regularly “adjusted” downward and those under construction might raise the prospect of heading to the rental market until prices stabilize.
-The two major national residential listing and database services, Zillow and Redfin, are now highlighting through email pushes the continued price drops in the Bend market and larger ones such as Seattle and Portland.
-Both Zillow and Redfin have pulled back from their “home flip” strategies to buy homes directly from owners for cash, fix them up and sell at a profit. For Zillow the program drained a reported $800 million plus from company coffers. But that debacle hasn’t stopped copycat companies in Europe from testing the strategy.
-Broker open houses – nearly absent in the overheated market – are back in the marketing toolbox, sometimes over entire weekends and during the week for the same properties. The “This one won’t last, act quickly” mindset and multiple offers has faded with sellers offering to cover buyer closing costs, and other incentives.
-Locally, the Deschutes County Planning Department reported that permitting activity outside the Bend city limits through September of 2022 declined on a calendar year basis, with a drop of 32.7% in applications for single family homes.
Where to from here?
The current market fluctuations and uncertainty are likely contributing to both buyer and seller indecision.
Homeowners already in place with low mortgage rates are more inclined to stay put and wait out market direction, perhaps willing to absorb some decline in prices until the future is more clear.
In turn this further constricts inventory and props up prices, making purchases by prospective buyers facing high interest rates even less accessible.
Although prices in many areas of the country, and in Bend and Central Oregon, are falling, with the substantial runup in value over the past two years it’s an open question when we’ll see a market more in balance.
The question is what inflection point in a mix of various factors will reveal a guide to the future?
