On August 29, 2023, the national average for a fixed-rate 30-year mortgage was 6.03%. This morning, the same mortgage is 7.12%. This morning's rate is an improvement from earlier this week, but more than a point higher than last year is significant. However, the market's mood feels similar to last year when rates were rising, and buyers were either priced out of a particular price point or pulled back to see what happened next.
Reporting on Jerome Powell's ramblings at Jackson Hole feels tedious as he stubbornly sticks to his mantra of further rate increases and promises to hold policy at restrictive levels for longer. Powell cited an economy that is not cooling, Gross Domestic Product above expectations, robust consumer spending, the housing sector picking up, and above-trend growth as reasons to stay the course. Powell did not mention the administration's penchant for printing dollars, with the annual deficit increasing in one seventy-day stretch this year by a whopping 750 Billion Dollars. The Federal Reserve has a mandate to communicate with Congress to help with monetary policy, something Powell seems reluctant to do. To say the Fed is fighting a losing battle is an understatement, but he reaffirmed that the policy of reaching 2% annual inflation remains.
I haven't been shy about expressing my disdain for how CPI and inflation are portrayed and manipulated, and a visit to shawdowstats.com reveals an entirely different perspective from what the mainstream media reports. Whichever number you believe, inflation numbers are an annual or a month-over-month increase. Even the 2% target is an increase, and in many ways, the steep increases of the last few years are locked in.
Are we in a housing bubble? A significant recession could bring down inflation and, ultimately, home prices. However, depending on who you listen to, the economy is either doing well, headed for a soft landing, or on a steep nose-dive. Perspective is everything as you evaluate your situation.
This morning in Deschutes County, the inventory of actively listed single-family homes increased slightly to 889. The median list price is 830k at sixty-one days on the market. This week in 2022, 929 homes were listed at a median of 730k. There were sixty-six pending sales in Deschutes County this week compared to sixty-nine in 2022, with sixty-one sales, down six from last year. The days on the market this week are similar to this week in 2022.
Year-to-date 2022 in Deschutes County shows 2935 sales at a median of 691k. As of this morning, there have been 2128 sales at a median of 650k for 2023. Using the median price for the entire county does not account for variation in the type of homes sold but shows an overall trend lower in 2023. Before the Fed doubled down on raising rates further, there was reason to believe the median sale price to close out this year would be flat over 2022. However, judging by the pace of sales and the expectation of even higher rates, it is increasingly likely that prices will be down slightly at year-end.
I remain bullish on Central Oregon, and the continued flight from large cities to smaller, recreationally minded areas is a big part of that. Bend and the surrounding communities have a tremendous appeal that isn't going away. Although, in some ways, it feels like August 2008.
"Remember...if all the headlines are identical, it's not news, it's advertising." ~Jason Bassler
The Bassler quote always comes to mind when I read over and over again how what is going on in the housing markets is "different this time." Markets don't fail in the same ways as in the past but succumb to new issues. So, in that sense, things probably are different this time. Some of the significant problems that could be of concern are commercial real estate, the short-term rental markets, and punitively high mortgage interest rates. I don't think anyone has an easy solution to the 30% vacancy rate in San Francisco commercial properties, and there is little doubt that the markets are awash with short-term rentals. Whether these issues are a catalyst remains to be seen, but exercising caution with any purchase over the next several months would be prudent.
Chicken Little predictions aside, well-priced homes in Central Oregon are still selling, and there is no reason to believe much will change in the remaining weeks before winter weather and the holiday season bring about our annual slowdown. As always, a long-term focus on real estate will serve you well. Fall is typically a great time for buyers, and this year is no different. Qualified buyers will have less competition than in recent years, and many sellers are motivated to close by year-end. If you have any questions about the Central Oregon housing market, I am always here to help.