This week, the Federal Reserve raised the overnight rate by 25 basis points, with expectations of another hike at the next meeting. It is tedious to read all the housing proponents pointing out that the overnight rate isn’t directly correlated with mortgage rates, and while that is true, you would have to have your head in the sand not to see that mortgage rates will be affected. The 10-year Treasury closed above 5% for the first time since 2007 and now sits at 4.998%, while the 30-year Jumbo national average is 7.36% and the 30-year Conventional average is 7.20%. Since conventional rates reached a low of 5.99% in February, rates and inflation have been trending upward. Kevin Warsh, the new Chairman of the Fed, is determined to get a handle on inflation, which has been above the mandated 2% target for over five years. Whether inflation is managed remains to be seen, but we are already seeing the impact of higher rates in the housing market. All but one segment of the luxury market saw week-over-week inventory growth, as activity slows.
Quoting Graham Summers of Phoenix Capital Research, “To be clear, 3.4% inflation is a long way from 2022. The economy is growing, payrolls are solid, and a Fed hiking into strength behaves very differently from a Fed hiking into a recession. I am not calling for a crisis.” The Fed may be hiking into strength, and Central Oregon shows continued growth, but in the foreseeable future, housing will look quite a bit different than it has in the recent past.
Deschutes County single-family home inventory between $1 million and $1,999,999 increased by 4 this week to 368, with 218 (59.24%) reducing the asking price by an average of 7.93%. Pending sales are down 3 from last week to 12, with 5 of those listings reducing the asking price by an average of 11.53% before securing a contract. Six closed transactions this week are down from 13 last week, with a sold-to-original-list-price ratio of 92.03%.
Single-family listings between $2 million and $2,999,999 are up by 3 from last week to 72, with 27 (37.5%) showing an average price reduction of 8.94%. Two pending sales match last week’s total, with one listing reducing the asking price by 1.41% before securing a contract. Two closed transactions double last week’s total, with no price reductions before securing a buyer, and a sold-to-original-list-price ratio of 96.15%. Throughout this cycle, higher-priced homes have maintained a higher sold-price ratio.
Deschutes County listings over $3 million are the only segment to show decreased inventory this week, down by 1 to 39; nineteen active listings (48.72%) reduced their asking price by an average of 12.28%. No transactions are pending for the second week in a row, with one closed transaction at the full asking price of $3,150,000.
Crook County single-family listings over $1 million are flat at 71 this week, with 40 (56.34%) reducing the asking price by an average of 6.64%. One sale is pending at $1,550,000, with a 6.08% reduction before being put under contract. Last week also shows one pending sale at $1,450,000 with no price reductions. No transactions closed this week in this price tranche.
Deschutes County farm listings increased by 1 to 13 this week, with 7 (53.85%) reducing the asking price by an average of 12.71%. No pending or closed transactions took place for the fourth consecutive week.
Crook County farm listings over $1 million are also up by 1 to 16, with 11 (68.75%) reducing the list price by an average of 5.84%. No transactions were pending or closed for the third consecutive week.
Desirable homes are still selling and maintaining strong sold-to-list price ratios, but accurate pricing is more important than ever. TD Securities expected three rate hikes in the cycle before the Fed raised rates by 25 basis points. That leaves at least two more hikes on the table, assuming that is enough to calm inflation at a time when the Treasury is buying back Bonds and increasing the M2 Money Supply. There is no question the housing market has moved into a new cycle, and tracking the weekly data will show exactly how much of an impact economic conditions will have. Stay tuned!
Sign Up for the Central Oregon Market Report
Sign Up for the Central Oregon Luxury Market Report
Your Bend Real Estate Agent is here to help
Reed Melton serves Bend and surrounding areas
Whether you are searching in Bend or any of the close by areas, I want to help you find the perfect property. Even if you are in the beginning stages of your search, I always like to be a resource, no pressure ever.