Pending sales in Central Oregon last week were robust despite the national average for a 30-year fixed-rate mortgage hitting 7.26% yesterday, the highest since the rate increases began in 2022. Inventory was flat in Deschutes County at 865 homes listed, up two in Crook County at 156, and up six in Jefferson County at seventy-nine. Deschutes County had a whopping ninety-two pending sales, with Crook County showing a 4x increase over the previous week at twelve and Jefferson County in line with recent volume at three. I heard of slow open houses last weekend, which did not represent actual activity. Typically in late August, people are out enjoying the end of summer and not touring open houses, which is a more casual way to view homes than scheduled showings with a Realtor.
Of the sixty-nine sales in Deschutes County last week, 30.4% (21) were cash deals, with the balance either conventional, FHA, VA, and one securing private financing. It may be surprising to some that so many people are financing in this rate environment, but the volume of cash deals is a typical mix.
Looking at this week in August, year-over-year pending sales show a median price increase from 650k to 698k, with the days on the market up one at twenty-seven. Pending sale volume decreased by four to ninety-two, and the average pending sale price dropped six-thousand dollars to 843k. Remember that pending sales in the MLS only show the listing price, not the negotiated price displayed in the sold data.
Comparing the sold data for this week in August reveals a slight decline in the median sold price from 662k to 655k. But, the median days a home was on the market before securing a contract declined from nineteen to fourteen this week. Sold volume increased from fifty-nine to sixty-nine, and the average sale price decreased from 815k to 785k.
Sales volume was robust in the first half of 2022, while mortgage rates remained relatively low but slowed in the second half as rates increased. Interestingly, on June 16, 2022, the national average for a 30-year fixed-rate mortgage was 6.11%, dropped to 5.42% on August 14, then spiked to 7.24% by mid-October. However, with rates at that point the highest seen in many years, buyers pulled back to reassess the market, and sales declined. The comparisons to 2022 are narrowing as we get further into 2023, but the year-to-date median sale price this year is still down, now at 650k compared to 695k in 2022. I expect the median sale price to narrow as the year progresses. By year-end 2022, the median sale price was 680k.
Since rates started ascending last year, there has been a steady drumbeat of a Fed pivot to lower rates once inflation was under control or in the event of a slowing economy. If you trust the most recent CPI numbers, inflation looks to be cooling, but the economy remains strong by many measures. Core inflation (removing food and energy costs) was 4.7% in July 2023, significantly higher than CPI at 3.2%. Crude oil has been rising, the Saudis appear unlikely to pump more, and the strategic petroleum reserve is at alarmingly low levels, meaning gas prices at the pump are likely to increase. To say the economy is complicated is a massive understatement, and there isn't any clear path to a Fed pivot.
While many mortgage rate buy-down options are available, I suggest paying down the principal during the lower rate period and potentially refinancing into a 15-year mortgage if rates come down. Refinancing to significantly lower rates in the future is looking less and less likely as the Fed has painted itself into a corner with a strong economy and higher prices.
Many analysts predict the Fed will readjust its inflation target to 3%, and for my analysis, I will leave out the comparisons to inflation calculations from years past. Although, I don't think many people are surprised that the government tweaks the calculations to paint themselves in the best light possible. Unfortunately, even a best-case scenario return to 2% annual inflation locks in the price spikes of the last few years. With most analysts taking recession talks out of the equation and the likelihood of a Fed policy that significantly reduces the supply of currency highly unlikely with a spiraling national debt, today's mix of rates and prices is likely here to stay. I expect mortgage rates to fluctuate between 6% to 7% for some time.
In the second half of 2020, our country experienced an unprecedented demographic shift that started with work-from-home and continued with many relocating further from cities than ever before. Popular, recreationally focused areas across the West witnessed significant population increases, including Central Oregon. There will always be ups and downs in the housing market, but the chances of everything that has taken place over the last few years unwinding is low.
However, prices will decrease if the inventory of homes for sale increases significantly and homes linger on the market. With inventory at historic lows and the days on the market barely above two weeks for sold properties, those changes are not in the cards for 2023. The best indication of future prices is the availability of homes for sale. Without a massive increase in homes listed for sale starting in early Spring, the chances of reduced sales prices by summer are almost zero. Mortgage rates might not decrease, but they are unlikely to increase much. All the data points to an increase in home prices in 2024.
As the summer winds down, we are approaching the best time of year for many buyers. Many sellers testing the market all summer are motivated to secure a deal by year-end and are willing to entertain lower offers. Some buyers pull back as the school year begins and winter weather looms. With a 2-1 buy-down, buyers can enjoy a lower rate and potentially refinance into something under 7% when the teaser rate increases. Although especially for first-time buyers or anyone stretched financially, I caution against counting on significantly lower rates soon. Real estate purchases should be long-term investments, and with enough time, Central Oregon remains an excellent choice.
I can provide an unmatched comparative market analysis, whatever your situation or market view. Not only do I provide up-to-the-minute data on specific neighborhoods and housing market segments, but I also have a spreadsheet with data going back to 1997 to provide a historical perspective. Many of you already rely on the Market Trend reports on my website. Property searches on EnjoyBendLife.com are updated every 15 minutes and emailed daily. Most area searches on my website also include sold data, or you can sign up for a Market Report that will automatically send you information on the active, pending, and sold activity for the neighborhood, zip code, or subdivision of your choice. Please reach out when you need help in Central Oregon!