At this time last year, the national average for a 30-year fixed-rate mortgage was 5.77%, on its way to a peak of 7.24% in mid-October. On this Wednesday last August, there were 928 single-family homes listed in Deschutes County, down slightly from peak 2022 at 972 on August 10. By the first week of October last year, available homes for sale began declining. Inventory at this time of year typically bounces around based on activity, so today's active listings of 883, an increase of eighteen from last week, is not unheard of. However, the 30-year fixed-rate national average yesterday afternoon was 7.49%.
You can easily find any opinion you want from experts in the real estate industry about which market dynamic will create more inventory. One of the analysts I follow opines that rising mortgage rates increase inventory, an opinion that is generally not shared in most media publications. In the short term, in Central Oregon, rising rates have not increased inventory because sales have been consistently strong. With Labor Day just around the corner and the change of seasons rapidly approaching, there is little reason to believe there will be a significant surge in new listings between now and the seasonal slowdown. I expect inventory to bounce around for another few weeks before settling into a steady decline into spring.
Pending sales this week declined by twenty-one to seventy-one, while sold properties were down one at sixty-eight. This week last year was particularly robust for pending sales at one-hundred-three, but overall, the pace of sales year-over-year has been similar. The median pending sale price this week in 2022 was 725k compared to this week's 699k.
The low availability of homes for sale keeps prices firmer than many would expect based on mortgage interest rates, and I do not expect any significant changes this year. However, I also do not see prices increasing, and 2023 is looking to finish the year with a slightly lower median sale price from last year. Once again, my predictions at the beginning of the year fell woefully short of reality! You might recall that I called for an increase of the median sale price of 9% and mortgage rates by this time of year in the high 5% range, two numbers that, in retrospect, were outlandish. Even though I have been skeptical of the Fed's assessment of inflation (transitory!) I believed rising rates would have had a more immediate impact on the economy, tempering increases by this time of the year. I never subscribed to the quick rate pivot many analysts predicted, but I also didn't expect further increases as we close out 2023, which now seems guaranteed.
Real estate activity in Central Oregon decreases significantly through the winter, with the low point of active inventory in 2023 at the beginning of March at 485 single-family homes listed. Looking forward to 2024, this will be an essential metric to track as an early indicator of how next year's market is shaping up. While rate increases from the Fed could be in the rearview mirror this spring, it will be interesting to see how the economy overall reacts. From today's vantage point, it is reasonable to expect mortgage rates in the high six percent range this spring, but I would not plan for much lower. I wouldn't be surprised if rates stay stubbornly entrenched near seven percent.
Not surprisingly, not every real estate market in the western United States performs equally. The incredible demographic shift over the last few years looks to be a continuing trend, with new residents to Central Oregon coming from far and wide. Decreased availability of homes for sale in Bend and the surrounding communities is an emerging long-term trend, not just an anomaly. With so much pent-up buyer demand, an increase in homes for sale or slightly lower prices would, in all likelihood, set off a buying frenzy, setting a floor for home prices. The home market is in continuous flux, but the string of events required to bring prices down considerably in Central Oregon seems unlikely. Without reversing work-from-home policies, a turnaround of conditions in the large West Coast metro areas, and a change in firmly established migration patterns, I expect the Central Oregon housing market to remain relatively stable.
Considering that I just admitted to being far off the mark in my predictions for 2023, my predictions for a stable Central Oregon housing market for next year may seem off-base. But, being over-prepared will never hurt if you are still on the sidelines as a buyer or weighing your options as a seller. However, anyone who plans to move to Central Oregon in any reasonable timeframe and plans for a market drop is likely expecting more than the market will deliver.
Now, more than ever, looking at housing with a long-term view is essential. Even experienced contractors are shying away from fix-and-flips as the prospects of turning any property quickly at a profit diminish. I recommend the same long-term approach when evaluating income-producing properties, particularly short-term rentals. Remember that rental performance for short-term rentals over the last couple of years was unprecedented in Central Oregon and may not perform as well in the future. I am not discouraging investors from considering many of the excellent investment options available, but a shift in focus will help adequately evaluate any potential investments.
Please do not hesitate to reach out if you need reliable, up-to-date information about the Central Oregon housing market.