One of the most challenging situations I deal with as a real estate agent is the question or statement that "I'm going to wait and see what the market does." Since I do not have a crystal ball, I can't say whether waiting could work out. Although being data-driven and immersed in our local market daily, I have opinions about the overall trends, even if I do not have any unique ability to predict the overall economy or mortgage interest rates. However, like the stock market, real estate is a long game. No buyer of quality stocks or homes from decades ago who held those assets is in worse shape today. Other than minor blips on the timeline, prices have increased. The exception for housing began in 2008 and, in some cases, equated to a lost decade before home values recovered. For anyone who lived through that period, including myself, it can be challenging to separate the PTSD scars from today's reality. But, unless your financial situation forced a sale during the downturn, almost everyone that held onto their housing investment is better off today. Starting in 2010 and lasting for years in some markets, buyers had a significant advantage that created massive equity over the coming years. Taking an apprehensive stance or anticipating another collapse is understandable, but the calculus becomes a gut reaction without using market data to steer your decision.
This morning in Deschutes County, there are 840 single-family homes listed, twenty-one less than last week and one hundred-thirty less than this week last year. There were ninety-six pending sales this week, the highest number since August 2022, with the median pending price at 674k, down slightly from the previous year's 699k this week. The median sale numbers have been narrowing as 2023 progresses, and as we wind down peak selling season, I anticipate the median sale price increasing as inventory dwindles. Remember that pending sale numbers are just the list price, and negotiated pricing does not show until the transaction closes. There were seventy-five sold homes in Deschutes County this week at a median of 767k, up considerably from this week in 2022 when the median sale price was 690k. By all accounts, the "housing recession" of 2023 is over. In all likelihood, 2023 will be flat or slightly up on 2022 by year-end.
One of the more accurate real estate analysts I follow revealed predictions for home appreciation nationwide in 2024 of 6% in a recent podcast. While the national numbers typically skew from our local data, there isn't any reason to believe Deschutes County will be exempt from price appreciation.
Low inventory is an accurate predictor of future pricing, and considering the low number of houses available today, there is little reason to believe prices will go anywhere but up in the foreseeable future. For reference, the median sale price of single-family homes in Deschutes County for 2019 was 424k. Our year-to-date median sale price of 650k is a 53.3% increase since 2019.
There is no question that home prices and mortgage interest rates have conspired to create a historic affordability crunch. Yesterday afternoon the national average for a 30-year fixed-rate mortgage was 7.1%. I also expect the Federal Reserve to raise another 25 basis points by year-end, hopefully, the end of this historical credit tightening cycle. However, the next Fed Open Market Committee meeting isn't for another two months, likely creating a welcome period of relative stability in the markets. When and how quickly the Fed backs off the current rates is yet to be seen. Although, with robust demand for Central Oregon real estate and historically low inventory, rising home prices are the most likely outcome of decreasing rates.
I regularly grapple with the idea of more expensive homes in Central Oregon and readily admit the concept is hard to comprehend. The factors driving this are entrenched, and any change would require a collusion of events of epic proportions that seems increasingly unlikely. Work-from-home, short-term rentals, demographic shifts for quality of life, and few west coast options comparable to Central Oregon are the significant drivers of today's market dynamics. Factor in that the median list price for single-family homes nationwide is nearly 450k, and Central Oregon prices begin to make more sense. Those choosing Central Oregon as their next destination have little reason to delay moving.
Lastly, the recent property values in Central Oregon have also impacted the investment market. While rents have accelerated in recent years, there is evidence of growing availability in the rental market and a softening of rents. Cap rates in our market typically fall well below 5% and, in many cases, are in the 3.5% range. Many income properties in desirable locations may provide cap rates and rental history in their marketing. Still, the pricing has more to do with the property's desirability than rental income. On average, short-term rental properties in Bend have more than a 50% vacancy rate, making the location a vital component of any evaluation.
I do not share these numbers to deter investors but to frame our market in a way that allows an accurate analysis. Whether you are looking for a property to call home or an investment, knowing what is likely in terms of price or a reasonable local cap rate is essential. Waiting for something improbable to occur leads to a poor outcome, and I would be remiss if I didn't provide an accurate view of today's market.
An individually tailored analysis is the first step to any decision, and I am always available to provide an unparalleled market analysis for your specific goals. Please let me know if you think I am wrong about any of my suppositions! I am intimately familiar with our local data and welcome any conversation that might improve my overall perspective. My goal as an agent is to be so good at my job that you couldn't imagine working with anyone else. Reach out anytime to put that to the test!