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Jerome Powell and his cronies at the Federal Reserve have changed their tune dramatically in the last several months. But unfortunately, they also seem determined to crush our economy in the name of inflation-fighting while simultaneously printing money for the current administration's pet projects. Not surprisingly, our economy and the housing market are feeling the effects. For example, this morning, Mortgage News Daily shows the average 30-year fixed-rate mortgage at 7.08%, a rate not seen since July 20, 2001. In contrast, the Freddie Mac website shows a rate of 6.29% for the week ending September 22, 2022, an increase of .8% in just a couple of days. 

To put the rate change in perspective, a home at the median pending sale price in Deschutes County last week was $629,900, with $3,566 in annual tax and $50/month in HOA dues. A down payment of 20% would be 126k. At 4% interest, the monthly payment would be $2,836, and at today's rate of 7.08%, the amount jumps to $3,810! That is $974 more per month and $11,688 more per year. Remember when the Fed and others in our government said inflation was transitory? 

If rates come down significantly, a refinance of the loan would make ownership more affordable, but determining when and how much rates might decrease is anyone's guess. The Fed promised another 75 basis point increase in October and another 50 basis point increase in December. A few months ago, there was complete consensus amongst Fed board members that the overnight rate at year-end 2022 would be 1%. Compared to today's 3.08% and a projected year-end rate of 4.33%, to say the Fed is talking out of both sides of its mouth is an understatement. The Fed also seems unconcerned with crushing the economy, so lowering rates quickly to relieve the impact of recession seems far in the future when the current stated mandate is crushing inflation while they continue printing currency. As interest rates climb, the Federal Government's payments on our $31T (Trillion!!) national debt increase, but the debased dollar means they pay down debt with cheaper money. That calculus is beyond my frame of reference and irrelevant to most home buyers, but it does illustrate the difficulty in predicting what interest rates might do in the future. As always, I firmly believe that home ownership is a long game, and while rates may be up, home prices are declining, making the balance a bit more palatable. If you can afford a home today that suits your needs, it may still make sense to buy, especially considering rising rents. Also, the mix of more inventory and the seller's willingness to deal make this juncture appealing if you are a cash buyer. Although, there is little doubt that the market will continue to evolve as rates climb. As I have mentioned several times, the big unknown will be how many sellers choose not to list as they grapple with the "golden handcuffs" of a sub-3% mortgage. 

"It is important to remember that market cycles are always occurring. Markets go up and down. The reality is there's never really a perfect market - just the market you're dealing with when you're buying your home.

You'll rarely be able to time the market, but if you can afford what you buy and hold onto it long enough, the best timing will find you."

-Gary Keller, founder of the Keller Williams real estate brokerage

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The national average 30-year fixed-rate conventional mortgage yesterday was 6.47%, the highest rate since 2008. Unfortunately, with persistent, rising inflation, the Fed will raise the overnight rate at least 75 basis points again today, with some economists encouraging 100 basis points. The mortgage market has been pricing rates in anticipation of continued Fed increases. Still, I expect mortgage rates to increase further after today's announcement. Many local lenders have rates below the national average, and programs available allow borrowers to buy down to a lower rate. If you are considering a buy-down, have your lender run the numbers to determine if the additional cost is worth it for your situation. For example, suppose you believe that rates will decline in the next several months. A buy-down might not make sense in that case because a refinance would be available before long. Conversely, if you think higher rates are here to stay, a buy-down might make perfect sense, with rates persistently higher. Unfortunately, I have no particular insight into how long rates will remain at or above the current rates.  

The inventory of actively listed single-family-family homes in Deschutes County is up slightly to 921 homes. At the same time, pending sales dropped somewhat to seventy-three since last week. The sold volume was unchanged at sixty-eight homes. The median sale price was $727,450, with only 20 days on the market before going under contract. Contrast that with median days on the market for the active inventory of sixty-two. Well-priced, attractive homes are still moving quickly. At this time of year, inventory bounces up and down slightly before declining into winter and early spring. Still, indications point to fewer homes listed as we start 2023. Buyers have less competition, more time to consider a property in the current market, and a strong chance of securing a below-asking price offer. Considering all of these factors, if you find a home you can afford that suits your needs, it makes sense to purchase today. Waiting will likely produce fewer homes for sale as homeowners with low mortgage interest rates and considerable equity stay put. There continues to be more robust buyer demand than active sellers, keeping prices firm despite higher mortgage interest rates. Ten of the sixty-eight homes sold were priced below 500k, with twelve above $1M, showing that buyers of all stripes are still active. 

Not every seller will sit out of today's market, and those looking to sell find motivated buyers and firm prices. Please let me know if you need help pricing your property. Now is a great time to regularly refer to my Market Trend Reports to track home prices weekly by navigating to that page of my website or signing up for weekly emails sent directly to you on Monday mornings. 

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The median sale price in Deschutes County for the last seven days is $752,500 marking five consecutive weeks of increase. The days on the market for these sold properties have remained steady at twenty-three. Days on the market for active listings increased by two, now at sixty-one, the most days for actively listed homes in the last couple of years. Active listings also increased slightly to nine-hundred-thirteen, an increase of twenty from the previous week. I pull these numbers early on Wednesday mornings but depending on which day of the week or time, the active listings will change, and I wouldn't read too much into this increase. Nationwide, actively listed homes decreased again last week, with 547,122 homes for sale, a decrease of 1%. As a point of reference, in 2019, the last time the housing market behaved "normally," there were over 950,000 homes actively listed for sale. Last week in Deschutes County, five-hundred-eight of the actively listed homes reduced the list price by a median of -5.69%. Sixty-eight homes sold last week, an increase of three from the previous week, with thirty reducing the price by a median of -6.17%.

The consumer price index came in higher than predicted yesterday at 8.3%, remaining at forty-year highs. The higher-than-expected CPI print marks twenty-seven consecutive months of rising inflation and portends another rate increase from the Federal Reserve next week. Steadily rising inflation has many economists predicting a 100 basis point increase, an entire percentage point. In addition, CPI news increased the 30-year fixed-rate mortgage from 5.97% to 6.28%, the highest since 2008. While Fed rate increases do not directly affect mortgage interest rates, expect mortgage rates to experience continued volatility and more increases in anticipation of the subsequent Fed rate increase. 

Rental prices and availability are even tighter than homes for sale. With continued buyer demand, decreasing inventory, and few options for those relocating to Central Oregon, I expect prices to remain relatively firm through the remainder of 2022. That said, there have been many price decreases, particularly below the median sale price, creating some opportunities for anyone engaged in the market this fall. Additionally, many local lenders have mortgage interest rates well below the national average. All indications point to significantly fewer homes for sale in the spring of 2023 as home-sellers weigh their options and choose to stay put. As crazy as economic conditions seem, today may be some of the best buying conditions of the past couple of years, with most sellers willing to accept an offer below the asking price. If you are in the market for a mortgage, I recommend speaking with several lenders, as each company has different options and targets a specific type of borrower. 

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Pending home sales in Deschutes County in the previous seven days jumped to eighty-nine, an increase of twenty from the week starting August 24, on par with the more significant weeks for new contracts this summer. Not surprisingly, for the season, the active inventory of single-family homes decreased to 893 from 929. Inventory seasonally decreases heading into winter as sellers are less active, and buyers interested in closing before the end of the year start to look in earnest. Five-hundred-four of the actively listed homes have reduced the list price by a median of -5.41%, and the median days on the market continue to increase, now at fifty-nine days. An example of correct pricing in this environment is that the median days on the market for the sixty-five sold homes this week was twenty-two. The median sale price was 730k, and twenty-eight of the sixty-five sales agreed on a price below the list price. The median price reduction of sold homes last week was -7.28%. 

Mortgage rates continued to climb, with the national average rate for a 30-year fixed-rate mortgage now at 6.25%. A whopping 40% (26) of the sixty-five sales in Deschutes County last week were cash deals. The odds of the Fed lowering rates this spring are growing increasingly long, and there is little doubt that higher mortgage rates are impacting buyers, particularly in homes below the median sale price. Although, with a limited, decreasing inventory, home prices have remained firm, albeit down from the highest highs in 2021. For buyers actively engaged today, there are many opportunities to have an offer below the list price accepted. While the economy is waving many red flags, inventory will be the most significant variable heading into 2023. Without an adequate inventory, buyers will still be competing over a small number of properties that will keep prices high. Likewise, the stagflation plaguing the rest of the economy will impact housing prices without a significant number of new listings. 

Unfortunately, I do not expect housing stagflation to be even across all areas and price points. Typically, sellers of higher-priced homes retreat or hold firm during slowdowns, while homes below the median sale price must adjust for higher mortgage rates and lower affordability for buyers. With the housing affordability index in steep decline and real wages, those in charge seem to be engineering a "Wall Street vs. Main Street" scenario that punishes those below the median home price. I do not pretend to have any special skills in predicting financial markets, although the reports I am reading don't paint a particularly rosy picture. So how do these economic conditions change the scenario for a typical home buyer or seller? Of course, every situation is unique, but with even tighter conditions in the rental market and rising rents, buying still makes sense for those with a long-term focus. For sellers with a solid plan after the sale, prices remain elevated, and buyers are stepping up. Waiting for better buyer conditions may pay off, although, in this environment, the devil you know may be a better option than the devil you don't! 

Whatever your goals in real estate in Central Oregon, it never pays to work in generalities or to follow reports in the mainstream media. Every person is in a unique situation, and I am well versed in Central Oregon real estate and evaluating different buyer and seller scenarios. Please feel free to contact me anytime so I can help to give you a clearer picture of your unique options. 

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With the end of summer rapidly approaching, it isn't surprising that pending sales decreased from last week's torrid pace but remained high at sixty-nine. Moreover, forty-three of those pending sales lowered the price before securing a contract by -6.57%, typical for the last several weeks. While the pending sales had a median of thirty-five days on the market, the sold properties the previous week were listed for a median of twenty-two days. Last week, the median sale price of single-family homes in Deschutes County was $661,995.

The bigger story will unfold over the next several weeks once we get past Labor Day weekend, which is typically slower for pending sales. Sold properties are also typically lower with one less business day in the week. Here in Sunriver, the volume of out-of-town visitors has noticeably declined with Washington and California schools back in session. Fall buyers usually do not have school scheduling concerns and are focused solely on finding a property before winter. 

While winter may not be far away, this week, temperatures will remain in the 90s even though morning temperatures have cooled considerably. Home sales have also cooled from the 2021 record highs, and the real estate business is beginning to feel more normal, although prices have remained firm with only 929 homes actively listed in Deschutes County, an increase of one from last week. Even though there will not be a large influx of new listings at this time of year, new properties are still hitting the market, and those that get the price right are selling fast. Four hundred ninety-three of the actively listed properties have reduced the asking price by -5.36%, with a median of fifty-six days on the market. Consider that the pending sales last week were listed for thirty-five days and the sold properties for twenty-two days, illustrating how price is crucial to competing in today's market. As we get closer to the winter holiday season, I expect the pace of price reductions to continue as sellers try to take advantage of the remainder of 2022 to secure a sale. Buyers and sellers alike should remember that there are only ninety days to secure a contract on a property to close before 2023! Now is the time to make offers or adjust your price if a sale this year is part of your plan. 

With fall being such an active season in the real estate market, you can rest assured that I am working and available to help with anything you need in Central Oregon! Please do not hesitate to reach out if you have any questions about a specific property or the market in general.

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Last week, I read several articles proclaiming either a housing bust or highlighting growing July inventory and a slowdown in the real estate market. Those reports indicate the problem in following mainstream media for real estate news; they are not up to date. Considering that we have almost completed the month of August, quoting July numbers is tripping over something that is behind you. While real estate is local, and some markets may be experiencing growing inventory, our inventory dropped again this week to 928 single-family homes actively listed in Deschutes County, down twenty-six from last week. The days a home takes to sell have increased to a median of fifty-four, and there were 496 price changes amongst the active inventory. However, we also saw the highest pending sales since May 4 at one-hundred-three, with sixty-nine sales. Keep in mind that sales will increase over the coming weeks based on the increase in pending sales. With a reduction of new listings hitting the market, inventory will decrease from now until the winter holidays, putting upward pressure on pricing. Not every home is overpriced and deserving of a price change, and as inventory declines, sellers are holding firm and, in many cases, being rewarded with prices near asking. 

Mortgage News Daily reports the national average for a 30-year fixed-rate mortgage at 5.73%, an increase of .31% from last week. Unfortunately for those buyers hoping to see a steep drop in home prices, prices have remained firm, and interest rates have risen. There is no indication that prices will decline in Deschutes County for the remainder of 2022, and 2023 is setting up to be another low inventory environment. On February 16, 2022, I reported 201 actively listed homes in Deschutes County; on April 20, 2022, there were 333 actively listed homes. Those numbers indicate how rapidly the volume of listings decreased over the winter and how long it takes for the number of homes for sale to build up in today's economic climate. With higher mortgage rates, higher rents, and higher home prices, home-sellers have very few incentives to list their properties for bargain rates, especially considering the low rates many have on their current mortgage and substantial equity. 

Last week I mentioned that real estate trends lag the current economic conditions, and how the market is shaping up today is consistent with that assertion. For example, if corporate earnings decline, layoffs exponentially increase, and workers cannot find jobs, home values may decrease. Further, if mortgage rates continue to climb and inflation remains entrenched, economic conditions for many buyers may deteriorate. There needs to be a glut of inventory before home prices decrease, and the long-term trends show the opposite of a surplus. Many buyers today focus on the housing collapse of 2008 while ignoring the long-term trend of rising prices. While the Case-Schiller Home Price Index may look inflated today, the consistent trend shows increasing home prices. Home purchases are often long-term investments and a higher quality of life for many people relocating to Central Oregon. Is an attempt at gaming the market preventing you from getting on with your life? 

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