Not much clarity for now: Waiting for that "inflection point"

         As Q3 2025 has wrapped, is there anything in the statistical tea leaves of Central Oregon real estate to predict year end and the future in 2026.
        A short answer: not much clarity there but many murky issues swirling.
        For all the uncertainty emerging from the first three quarters of the Trump administration the regional housing market appears to be performing slightly better than many parts of the country. This continues a trend of the past few years.
        The question, then, for Bend and Central Oregon is whether it can continue to outperform national trends. That’s far less certain.
        As usual the interest rate bogeyman is still stalking. Despite a modest decline this year and the talk of a more accommodating Federal Reserve, rates are still at 6.30% as of October 9, according to the Federal National Mortgage Association (Freddie Mac) database. That’s nearly a point and half below the high of 7.76% reached on November 2, 2023.
        But it’s still a whopping rise from the low of 2.67% recorded on the last day of 2020, before rising to first cross 7.0% on October 27, 2022, followed by ups and downs, yet remaining above 6.0% since then.
        On its website, Freddie Mac notes on October 9 that: “Over the last few weeks, mortgage rates have settled in at their lowest level in about a year. There is growing evidence that homebuyers are digesting these lower rates and gradually are willing to move forward with buying a home…”

        Although any downward move in interest rates could be welcome, there are substantial other factors at play in the economy – and by association, the real estate market across the country.
        On the positive side, the securities markets are apparently ignoring the headwinds of interest rate uncertainty, contraction in hiring and lower GDP growth. There’s also the ever-present specter of how much, or how little, Trump’s tariff wars will impact longterm inflation of many goods, including building products that affect new housing costs.
        Lower interest rates could help the housing market. But the positive influence could be mitigated by rising construction costs, lower employment and wage stagnation.
        And there’s rising concern that the lengthy bull market run on Wall Street is bound to moderate, even implode, resulting in a rush to gold and even once-derided cryptocurrency as hedges. Part of the gold rush is attributed to the potential decline of the dollar as the bulwark of world currencies.
        Moreover, much of the equities runup has been accelerated by a buying frenzy wishfully tethered to the as yet unknown contribution of AI.  Advanced chip development and data centers have mushroomed on the back of debt and even government investment rather than financed with booked revenue.
         As Jamie Dimon, CEO of JPMorganChase, expressed recently, there are many imponderables facing markets:
     "All these things cause a lot of issues that we don’t know how to answer,” he said. “So I say the level of uncertainty should be higher in most people’s minds than what I would call normal.”
        What all this means for real estate – local, regional and national—is (drum roll) for now unpredictable.
    So back to the basics as noted in new statistics as recorded at the end of September as gleaned from the Beacon Report of Beacon Appraisal Group using data from the regional Multiple Listing Service.
        The median price of a single family home on less than an acre in Bend for the rolling 12 months was $741,000, a rise of 14,000 or 1.92%, more than for the comparable period that concluded at the end of September of 2024.

        During that period there were 1,693 sales closed and 560 homes listed at the end of the month. That translates to an inventory of four months of available homes, based on the average of sales for the previous 12 months. It’s a half-month more available for sale than in late 2024, but only slightly in the range of 4-6 months usually considered to be a market in balance between sellers and buyers.
        By comparison, for the previous 12-month period ending September 30, 2025, Bend single family inventory was 3.5 months with 1,537 sales for that span and 451 units listed.
        Of the sales, more than 25% closed at a price of more than $1 million, continuing a trend that has run for at least a year. Also, of the total sales at all price points, more than 30% were cash transactions rather than financed with conventional loans.
        Up the road only 15 miles north to Redmond, statistics show some differences in the single family market.
        The median price of a single family home there rose slightly less, only 8,500 or 1.65% from $515,000 to $524,000 for comparable 12-month periods ending September 30. But Redmond inventory was only two months, based on 666 sales the recent period and 121 homes listed.
        In the “luxury” market, there was only a single sale that closed above $1 million, a scant .01%. And Redmond recorded more than 10% fewer cash transactions, at 20.57% than the 31% in Bend.
        Elsewhere in the region, Sunriver, which includes the Crosswater and Sunriver golf resorts, recorded a median single family sale price of $950,000 with only 115 sales and 49 listed at the end of September.
        Sisters had 117 sales at a median of $743,000 with 54 listed; Lapine, 130 at $375,000 and 75 listed; Jefferson County (Madras and Crooked River Ranch, 168 at $350,000 and 75 listed; and Crook County (including Prineville), 264 at $426,000 and 120 listed.

Inflection Point? About face?.....Pivot?: Bend real estate market

             At the halfway point of calendar year 2025, and midway of Trump’s first year in office there appears to be no clearcut consensus as to direction of the economy or the various sectors such as real estate that it comprises.
            There is one widely accepted fact, however. TACO Don’s wild tariff swings are leaving a wake of uncertainty. The starts and stops are impeding investments in manufacturing, services and retail businesses, even though the stock market has rebounded from Trump’s tariff “Liberation Day” performance.
          Wall Street, or the investor class, now appears to have written off tariff worries--for now. But there’s still considerable concern on Main Street, which drives the economy with retail and services purchasing power. The upshot-- a nervous wait and see attitude.
        Barring an untenable spike in already high interest rates, will the great American dream of home ownership be more attractive as a refuge – a scramble to tangible asset safety? There’s no clear consensus.
        Pivotal to real estate is the direction of interest rates, against the backdrop of continuing tension between Trump and the Federal Reserve – specifically Chairman Jerome Powell, whose term expires under a year from now.
        In his trademark social media carping, Trump has been insulting and goading Powell to reduce interest rates. But the Fed chairman and the board majority prefer to hold the course given the potential effects of tariffs and other Trump policies to push inflation higher.
        Real estate markets, especially residential, have been struggling in many areas of the country. A Redfin report notes that 15% of national home sales contracts have failed. Central Oregon real estate has previously bucked national trends. But the region thus far has not been able to build itself out of high prices that challenge a large portion of the workforce to enter the housing market.
            One sign of a possible shift has emerged in Bend, by far the largest market segment in the region. From a marginally favorable sellers market for the past few months there are signs of a slight edge toward favoring potential buyers.
            But the caveat is whether any slight change – absent more favorable interest rates and a coherent administration tariff policy-- will benefit either buyers and sellers.
            In Bend, the largest regional submarket, the median price of a single family home on less than an acre was $724,500 for the 12 month period ending June 30. That was 1.90% lower than the $738,500 recorded over the previous 12 months of mid 2023 through mid-2024.
            Through June of this year the monthly median hit a high of $832,000 in April and a low of $700,000 in November and  December of 2024, and February this year.
            Of note, more than 24.66% of the total 1,610 sales for the 12 months closed at more than $1 million, including 84 at more than $1.8 million. Only 94 homes sold at less than $500,000.

            As outlined in the July Beacon Report by Beacon Appraisal Group, there was nearly five months inventory of homes available for sale, as calculated by averaging the previous 12 month sales compared to homes currently listed. That was the same as June and has risen from a low of 2.5 months in November and December of 2024.
            That level of homes listed in relation to past sales puts Bend on the edge, or by some interpretations, of  a shift from a sellers to buyers market. However, consistently high prices along with buyer and seller hesitancy given economic uncertainty could keep the market in more of a static situation than revealing a trending direction.
            In Redmond, the second largest regional market segment, the  rolling 12-month median price of a single family home on less than an acre was $518,500 or 1.57% higher than the $510,500 for the previous comparable period. Redmond inventory was lower than Bend, at three months, with 693 sales during the period and 166 listings at the end of June.
            There were only two sales at more than $1 million, with most clustered in the $400,000 to $600,000 range.
            Together, Bend and Redmond account for about 75% of all single family home sales on less than an acre in the seven submarkets tracked by the Beacon Report with data from the regional multiple listing service.
            Of the five other submarkets, Sisters and Sunriver held positions as the highest median priced areas of Central Oregon, with Sisters recording a median of $739,000 in June and Sunriver $897,000. Note that Sisters and Sunriver include Black Butte Ranch and Sunriver Resort, respectively.
            Median prices for June in the other three submarkets ranged from $360,000 in Jefferson County (Madras); $394,000 in LaPine and $417,000, Crook County (including Prineville).

Some indicators of a changing market

 Hints of an evolving market can be noted in anecdotal and on the street observation.
Open houses, once an oddity of the blistering Covid era market, now dot the Bend weekend landscape. 
            For Sale signs also remain in front of homes after the listings are no longer active on the multiple listing service, providing brokers an opportunity to reset the date for the number of days the home has been on the market. That also leaves the listing broker with an opportunity to interest a potential drive-by  buyer.
            Builders are also stepping up to energize sales. Some are offering interest rate “buydowns” and also credits for “upgrades” that would add thousands of dollars to the listing price.
            “We’re tired of these rates, and we know you are too. So we decided to take it down a notch!,” reads a recent email from a large Bend builder.
            The term “Price Reductions” on listing flyers and email blasts is now obsolete, in favor of more euphemistic terms like “New Price,” “Revised Price” or “Price Adjustment.”

 Multi-family housing:: Struggling From Oversupply

 Another indication of softening of the real estate environment is a glut of vacant apartments in Bend, coupled with more new ones flowing through the construction pipeline.
            A report by a leading Bend commercial brokerage estimated earlier this year that as many as 1,000 Bend and Redmond apartments were vacant, noting that another 1,000 were expected to come to market in the near future.

Facebook ads increase

            The City of Bend has aggressively pushed new multi-family developments, initially offering substantial tax breaks to a couple of projects south of the downtown area. The city then backtracked on breaks for subsequent projects, shifting to a tax increment financing strategy, rather than upfront break, to encourage building in the urban core.
             A major Los Angeles based developer has backed off plans to begin consruction of a 1,600 unit project, citing interest rates, high construction costs and a generally unfavorable multi-family market.
            The aggressive push for more apartments has run up against the reality of rents that have yet to adjust significantly to reflect area incomes. Vacancies in newer more upscale buildings have prompted incentives such as free months rent. And colorful balloons float above tent signs encouraging potential renters to take a tour.
            In single family neighborhoods rental signs that were largely absent only a few years ago now languish in front yards for weeks. One factor could be that single family home rentals were in demand for transient healthcare workers who enjoyed substantial six-figure incomes during the Covid shutdown.
            For investors in multi-family projects, capitalization rates – as calculated by net income in relation to listing prices – have started to rise. The higher the “cap rate,” the more attractive to a buyer, the lower better for the seller. And investors require cap rates closer to prevailing interest rates.
            Local commercial brokers say there may be a tipping point wherein apartment owners decide that more substantial resets of rental rates make more sense than leaving units vacant. Again, interest rates are a factor, especially for newer projects still carrying higher rates of recent years with possible balloon payments coming due and refinancing providing little cash flow relief.
            A turnaround in the multi-family market may have to wait until overall direction of the economy is more clear, allowing for loosening of interest rates and giving renters and their employers more confidence in the future.

2024 down; 2025 Ahead - Major changes or more of the same? Too many unkowns

             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.

           

Q1 2022: Prices continue upward with low inventory

             Predictable. No surprises. More of the same.
            Those are some of the likely responses of anyone monitoring the Bend and Central Oregon real state market, which has been in an upward arc for months. Or make that years.
            The latest numbers come from Beacon Appraisal Group of Redmond, based on tablulations by the MLS of Central Oregon covering Deschutes, Crook and Jefferson counties.
            In the first quarter of 2022 the median price of a single family home sold in Bend rose to $773,000, a nearly 4.45% jump over the $740,000 in February and 13.17% more than the $683,000 in January.
            On a rolling 12 months basis from the end of March 2021 through March 2022, the median price rose by $115,000, from $535,000 to $650,500, or 22%, over the previous March 2020 through March 2021 period.
            There were 2,503 sales for the 12 months, with only 132 listings at the end of the period. Calculated by averaging sales for the 12 months, the inventory based on current listings in a scant 0.6 months.

            Viewing sales by price groupings, 57.69% of units sold were in the $400,000 to $700,000 range. There were only 100 sales lower than $400,000, and only four listings under that at the end of March this year.
            The number of $1 million plus sales continued upward, with 391 above that and 70 of more than $1.8 million.
            In Redmond, the median price for March of 2022 was $520,000, a rise of 7.66% from February. The rolling 12 months median for Redmond was $450,000, 24% over the $363,500 for the previous comparable period.

Redmond

            Redmond had 1,056 sales in the 12 months and only 55 listings at the end of March, translating to an inventory of only 0.6 months, the same as Bend.
            There were 58% of Redmond sales in the $350,000 to $500,000 range and none above $1 million.
            Although Redmond’s 12 months median price of $450,000 was 30% lower than Bend’s, the smaller city to the north had only a single listing under $400,000 at the end of March, even lower than Bend’s four in that range.

The smaller submarkets

            In the smaller submarkets tracked by Beacon Appraisal and the MLS of Central Oregon, single family sales totaled 1,140, with Crook County leading the group at 333 closings.
            Also included in the smaller submarkets are Sisters, Sunriver, La Pine and Jefferson County (including Madras and Crooked River Ranch).
            Sunriver – including the resort complex of Sunriver Resort, Caldera Springs and Crosswater – had the highest median price mark in the first quarter of 2022, at $885,000, with 33 recorded sales.
            Sisters was next with a median of $667,000 on 38 sales, followed by La Pine, $452,000 on 51 sales; Crook County, $390,000, 70 sales; and Jefferson County, $356,000, 62 sales.
            Inventory in the smaller submarkets ranged from a low of only 0.12 months in Sunviver to 1.5 months in Jefferson County. La Pine has a 1.2 months supply and Crook County 1.3.

Bend sees more million dollar sales - as affordable housing needs grow

             As the conversation over affordable Bend housing continues, home prices are also escalating at a rate that may outpace any near term solutions.
            Data compiled by Beacon Appraisal Group for its monthly market report shows that the median price of a Bend single family home on less than an acre was $640,000, the third consecutive month above $600,000 although below the high monthly median of $651,00 in April.
            Perhaps more remarkable are the sales of homes at more than $1 million. There were 341 homes closed at $1 million or more for the 12 months through June of 2021, a 158% increase of the comparable midway point of 2020.
            The trajectory of the million dollar sales has more than quintupled the 67 at that range recorded in just the three years since midway 2018.
            As a percentage of all sales, those of $1 million or more accounted for only 2.6% in 2018, then rose to 4.7% in 2019; and 5.7% in 2020 before leaping to 12.3% for the 12 months ending June 20, 2021.
          Although the upward arc of regional housing sales has yet to show any weakening, it’s instructive to balance single month prices over a 12-month stretch.
            By that measure, Bend’s median single price for homes on less than an acre over the 12-months from July of 2020 through June of 2021 was $567,000, a jump of 23% over the $460,000 recorded for the comparable 2019 through 2020 period.
            The median price for the same quarter of the two years shows a greater increase, from $464,000 for the three month median in 2020 against $640,000 in 2021 – a 38% increase.

            To the north in Redmond, the region’s second largest housing market, the June median price was $451,000. For the 12 months the median was $374,000, 14% above the same 12 months of 2020. The quarter to quarter price of 2020 and 2021 rose 33% from $334,000 for the 2^nd quarter of 2020 to $443,000 in 2021.
            With Bend homes going into sales contract in last than a week on the market in the past several months, and often closing above listing price, the path for more substantial affordable workforce housing in the city is difficult.
            Bend is not unlike other smaller to mid-sized municipalities, many in the West, where attractive outdoor recreational opportunities combine with other lifestyle amenities to change the character of those once included in the “last best place” category.
            There are few undiscovered western gems left, with such towns as Whitefish, Bozeman and Livingston, MT and Prescott and Flagstaff, AZ and even Washington’s more remote Methow Valley straining under an influx of new part and fulltime residents.
            One possibility for more dedicated affordable housing lies in the distant horizon after approval of special legislation that would allow Bend to bring 260 acres of land bordering the southeast limits into its urban growth boundary.
            In theory House Bill 3318, which makes an exception to usual state land use procedures, could add land for as many as 800 affordable housing units on 20 of the 260 acres, with a 50-year deed restriction. It would also restrict 12 of the acres to anyone making 60% of the area’s median income, among other provisions.
            Also in the early stages of development in southeast Bend is what is known as the Stevens Road tract, 375 acres now held by Lands Bend Corp., a development group with several local projects whose principals include former California Republican Congressman Gary Miller.
            Lands Bend acquired the property from the Oregon Department of State Land for $22 million in the Spring of 2020. That acreage already lies within Bend’s urban growth boundary.
            The Bend Planning Commission is reviewing the company’s preliminary master plan that would provide for more than 1,700 housing units, about 650 of those single family homes, 359 townhomes and approximately 700 multi-family units.

Bend’s affordability challenge

            In a July report the Bend City Council announced the city had a total of 3,942 new housing either completed, under construction or in planning review in the period 2019-2021, which the report said exceeded a council goal of 3,000 units.
            The number included 1.976 finished units, 1,406 under construction and 560 being reviewed.
            The numbers appeared to give city leaders some encouragement in the continuing housing crunch. But another study by the city unveiled at a recent public online webinar shows affordability remains a major issue in relation to local median income.
            US Census data for the period 2015-2019 shows Bend's median household income at $65,662.
            On July 22, city officials held an information webinar to explain how the city plans comply with new Oregon legislation, HB 2001, which mandates that municipalities provide for multi-family units such as apartments, condominiums and townhomes be allowed in areas zoned for single family homes.
            A chart presented in the webinar shows that a household earning an adjusted median income of $120,600 could in theory afford a home priced at the maximum $566,980. That would leave the buyer short by $84,020 to purchase the median priced home that solid in April, according to Beacon Appraisal’s statistics as drawn from the MLS of Central Oregon.
            It would take an income of $64,300 to buy a home priced at a maximum $299,000, as noted in the city’s affordability chart. It would be a longshot if someone were fortunate enough to find one of the only 72 homes that closed at less than $300,000 out of 2,755 total sales for the 12 months that ended in April.
            And there were no closings at less than $300,000 in April.

 

Where to now: Interest rates, inflation and the housing market?

             As the housing market explodes with demand and tight inventory, the natural question arises of whether this is another housing bubble like the one that popped in the “Great Recession.”
            Some of the supply and demand factors are similar although inventory during the earlier pre-recession pricing boom generally remained higher than today in most areas of the country, including Bend and the rest of Central Oregon.
            Another key difference is that lax lending standards have largely disappeared with many buyers in today’s market coming in with all cash or solid loan prequalifications.
            Interest rates may be playing a larger role in today’s housing trends than in the previous boom and bust cycle.
            In the runup to the 2008 housing market peak and collapse, 30-year fixed rate mortgage interest rates averaged 6.34% in 2007 and 6.03% in 2008 according to charts of the federal FreddieMac database. Over the decade ending in 2020 rates fluctuated in a range from mid to higher 3% to 4%.
            As of May 13 this year the Bankrate benchmark survey of the nation’s largest mortgage lenders showed the 30-year fixed mortgage rate at 3.050% with an APR of 3.270%
            On May  12 the Dow Jones Industrial Average fell more than 600 points and the S&P 500 Index dropped a proportionate percentage, before rebounding to recover about two-thirds of the losses by the next day’s market close.
            Much of the drop was attributed to a rise of 0.8% in the April Consumer Price Index, the most in a single reporting period for more than a decade and 4.2% above April 2020. That raised concerns of rising inflation with government stimulus spending and a recovering economy. There’s apprehension this could in turn force the Federal Reserve to back away from its prolonged pattern of “quantitative easing,” or lower interest rates.
            However, barring a major shift in the Fed policy it doesn’t appear likely that gradual increases to tweak inflation fears would significantly blunt the continuing demand for housing. One analysis is that the largest segment of the CPI price increases was used cars and trucks, spurred by computer chip scarcity holding back new car sales.
            Another factor, the thinking goes, is that the dramatic upswing in new housing prices is-- besides pandemic demand--also due to pandemic related timber harvest and mill operation reductions pushing lumber prices to new levels.
            A local and regional snapshot is available from statistics provided by Beacon Appraisal, and derived from the MLS of Central Oregon database.

            At the March 31 end of the first quarter of 2021, only 61 single family homes on less than an acre were listed in all of Bend and outlying areas of Tumalo to the north and Alfalfa on the eastern edge. That translates to less than 0.30 months inventory.
            Another way of parsing the inventory is to translate the low inventory of listings to the pace of sales as determined by the time a home is on the market. Consider that most homes in the Bend area have gone from listing to pending sales in barely four days for the past four months.
            At the end of the Q1 2021, the median price for a single family home on less than an acre in Bend that sold in March was $590,000, more than 28% higher than the same month of 2021.
            For the period from March of 2018 through May of 2020 monthly median prices had held in a range from a low of $415,000 in May of 2018 to a high of $475,000 in August of 2019.
            Then came what might be logically called the “pandemic inflection point,” as the May 2020 median price of $445,000 jumped to $529,000 the next month, hit $560,000 in October, dipped to $524,000 in December and rose to $580,000 in January this year.
            When calculated over a 12-month period ending in March, the median price was $535,000, an increase of 16% over the $460,000 median for the 12-months ending in March of 2020. A comparison of median prices for the first quarters of 2020 and 2021 shows a 26% increase from $460,000 to $580,000.

            For April this year the Bend median hit $590,000 according to statistics in the Beacon Appraisal report. In emailed comments, Beacon’s Donnie Montagner noted that 40 of the 236 Bend sales in April closed at $1 million or higher, or 17% of the total. That compared with April 2020 with only 10 sales over $1 million out of 146 closings, or 7%.
            “After reviewing the data several times, I noticed the median was heavily influenced by the number of sales in the 1Mill+range, which had increased significantly," Montagner wrote.
            Nevertheless, he explained, “While sales in the (million plus) range have an impact on the median, the overall SFR (single family residential) price trend in Bend is significantly trending upwards when compared to the past several years.”
            The housing demand has veteran brokers competing for scant inventory. After capturing a listing the frenzy usually begins with multiple offers, often above the listed price. That in turn has given rise to “offer review days,” often only several days after a home is posted on the MLS. In many cases those offers are in hand even before the listing is known to the general public.
            More  often than not the offers are all cash, with no financing contingency. And even with the financing contingency the offer will likely have to substantially top others to even be in the running.
            Another trend has been a decrease in contingencies for inspections – with some buyers willing to take the risk that a problem may require additional investment, rather than be left in the cold in a hot market.
            Driving the housing market for at least the near-term could the delicate balance of consumer response to current low interest rates against potential higher rates resulting from rising inflation—along with uncertainty over the choppy economy as it emerges from a tough stretch.