Now that 2024 is in the rear view mirror,
along with the presidential election, are there any emerging clues to the 2025 real
estate market direction?
To hear newly-installed Trump tell
it he’s going to take care of one critical variable – interest rates.
“I’ll demand that interest rates
drop immediately,” Trump said. “And likewise, they should be dropping all over
the world. Interest rates should follow us all over.” Trump blustered in a virtual
appearance before the the World Economic Forum, often jusst shortened to “Davos,”
for the cognoscenti of the financial world.
Well now, that taken care of,
everything should be hunky dory in real estate. He’s president and never
lies, dissembles or breaks a promise. Let’s keep an eye on eggs, which
Trump touted before the election would be less costly along with prices of other
consumer goods.
As Elon
Musk, often called Trump’s “First Buddy,”shakes things up in the federal
sphere, one of the more curious new presidential edicts, euphemistically known as executive
orders, is to force federal remote workers back to the office. This could mesh with another strategy to sell much of
federal office space. Fewer employees left after firings and resignations would mean less needed office space, and what is left would be made unattractive to returnees.
Maybe interest rates will fall along
with the price of eggs as the bird flu abates. Maybe the idea of a “sovereign
wealth fund” Trump has floated will be a reality, funded by all that surplus
oil revenue from ramped up “drill baby drill.” But
how does that work to reduce the the country’s current budget deficit? One
possibility mentioned is to issue more debt to “fund the fund” so to speak.
Hmmm. Reduce the deficit by borrowing to invest and build sovereign wealth? What could go wrong?
Let's pivot from Trumpisms, albeit
realizing that the chaos created thus
far by the new administration will nevertheless hang over the economy in some
way at least in these early days and weeks, and likely much longer.
The Year Past
Looking back at 2024 in Bend real
estate maybe the most salient observation could be the lack of any well-defined
trend. Inventory of single family homes for sale remained tight, prices
remained high relative to local median incomes and total sales stayed about the
same as the previous 12 months.
All this, according to the Market
Action Index of First American Title Co., translated to “stasis” and a “slight
sellers market,” thanks to continued low numbers of homes for sale as reported
in early January.
That assessment could easily be
translated to “nothing new to see here,” in that virtually the same language
had been used in nearly all of the title company’s weekly reports for 2024.
The final Q4 2024 Beacon Report by
Beacon Appraisal Group shows the the rolling 12- month median price of Bend single
family homes on less than an acre was $710,000, a 3.0% drop from the $732,500
for the previous 12 months of 2023.
The median monthly price hit a hgh
of $800,000 in October and the low point in February, at $682,000.
There were at total of 1,582 sales during
the 12 months, a slight uptick of 17 closings compared to 2023, with an inventory
of 2.5 months as calculated using the 319 active listings at the end of
December and dividing inventory by the average monthly sales in 2024.
In Redmond, Central Oregon’s second
largest market segment, median prices for the 12 months rose by $23,000 to $509,000
from $486,000 at the end of 2023, a slight bump of 4.73%.
Redmond sales also rose by 16%, or
by 114 additional sales in 2024 from the 598 in 2023. Inventory there was also
tighter than in Bend, at only a 2.0 months supply.
Affordability Remains an Issue
Moving into the new year, the quest
continues to find strategies that will that
will enable families with the Bend median household income of slightly under
$89,000 to obtain affordable housing. At the median income level, with an
optimistic 6% interest rate, a healthy 30% down payment, and modest $550
monthly debts a family could afford a home priced at $447,000.
According to the Beacon Report, only
78 homes out of the total 1,582 homes sold in Bend during 2024 were priced from
$400,000 to $500,000 – and only five listed in that range at the end of
December.
There is a disconnect between the availability
of “affordable” homes for those with median incomes, and the high end of Bend
sales
Last year 393 homes, or 24.8%, sold
for more than $1 million, and 73 above $1.8 million.
As has been reported throughout the
country, among factors that likely drive higher sales prices are owners with
low interest rates, or even no mortgage, who have been in their homes for a considerable
time, and others who bought during the early 2000 decade recession. These may
be able to roll generous cash margins into other properties – without the onus of
having large mortgages at currently elevated interest rates.
Also part of the affordable equation
for the local workforce is the availability of rental inventory.
The Rental Market
In
the past few yeas Bend has experienced a substantial increase in multi-family
investment and new construction- to the extent that for Q3 2024 one of the
region’s oldest, leading commercial brokerages concluded: “Looking ahead the
wave of new apartment development will hit the brakes.”
Also
in the third quarter of 2024, Compass Commercial’s Navigator market report
noted that the region’s slowing population growth had reduced demand, resulting
in “stagnated” rental rate growh with increased length of vacancies leading to
more landlord concessions.
“Rent
rates will likely remain flat, at best, for the next couple years. For property
values to rise again, we will need to see both increasing rents and declining
interest rates,” the Q3 report for 2024 noted.
That
assessment was validated later in 2024 when a Los Angeles based owner delayed planned
construction of a massive 1,600 unit mixed use project on former industrial
land near the Old Mill District, citing interest rates as a reason.
Another factor is the city’s pause
and reconsideration of offering tax deductions to developers in that area,
after two builders had received them and started construction of
apartments.
Now, seemingly a whiplash about face
in barely three months, Compass Commercial’s new multi-family report for the
final quarter of 2024 cites an assessment of the national real estate site
CoStar which paints a much rosier picture.
“Among apartment markets with inventories
under 10,000 units, Bend landed among the top 10 performing markets, a cohort
that spanned the Pacific Northwest, Midwest, and Sun Belt regions,” Compass
quotes from CoStar.
If the more recent analysis and
predictions for 2025 come to pass, compared to the report only a few months
agin, the Bend multi-family market would indeed be a turnaround star.
Tourism and Real Estate
Finally, a look at the Central
Oregon tourism sector, which contributes substantially to the local economy in
terms of employment in lodging and other service businesses, by some estimates as well as real estate in the form of vacation
home puchases.
In a presentation to city officials in early
January the senior budget and financial analysit for the Community Economic
Develoopment Department noted that development fee revenue since 2022 showed, “development
is slowing down…the type of development is changing.”
Reasons, he noted, could be due to, “everything
that happened with Covid and the macroeconomic picture with interest rates? Or
is that just….a result of Bend hitting a certain size.”
And every city that hits that
certain size then slows down or the development type changes,” according to
Roger Serat.
Amond the dramatic shifts Serat
noted were fees for short term rental
permits, which in 2024 according to his research showed a decline from $301,119
in fiscal year 2022 to only $42,561 in 2024.
One report said that all of Central
Oregon, including resorts such as Sunriver, Black Butte Ranch and Eagle Crest brought in $1.5
billion in related tourism revenue for 2023.
However, statistics from Visit Bend,
the city’s tourism promotion group, have shown lodging room occupancy dropping
by 6.5% in July and August of 2024, likely due to wildfire smoke in the region
but possibly also the tailing off of post-pandemic travel.
What’s the bottom line?
With the background of a chaotic first
few weeks of the Trump administration best not to count on anything in real
estate – especially as to lower interest rates suddenly creating a boom in sales.
If tariffs on
Canadian building products continue to be an on and off and on again roller
coaster expect new construction and housing affordability to be problematic.
Moreover, if the stock market – a favorite
performance metric of Trump– can’t digest economic uncertainty maybe look
for real estate sectors to tread water in the near term.
