With eleven business days left in 2022, we see signs of what the housing market may look like in 2023. The November consumer price index increased by 7.1%, which applied downward pressure on mortgage interest rates, now at 6.28% for the 30-year fixed-rate national average. I'm old enough to remember when our target inflation was 2%, so the current inflation rate still seems astronomically high, even if the markets behave as if Christmas arrived early. In addition, analysts expect the Federal Reserve to raise rates today by 50 basis points, a reduction from the previous 75 basis points hikes from the past meetings of 2022. So, what are the signs showing for 2023? I'll start with Deschutes County:
This morning in Deschutes County, inventory declined further to 721 single-family homes listed for sale. The median sale price during the last seven days was $720,395, with forty sold homes. For comparison, this week in 2021, there were 140 sales at a median price of 615k. While a lot can happen over the next several weeks, the decline in active inventory will continue, and prices will remain firm, bolstered by lower mortgage interest rates.
The definition of Inflationary Psychology is consumers spending more now because of the belief that prices will increase in the short term. There isn't any doubt that many home buyers feel this pressure, even if a percentage of the general public anticipates a crash in home prices. Unfortunately, the spending associated with Inflationary Psychology is a self-fulfilling prophecy that increases the velocity of money and boosts inflation. Even with a reduction in CPI (still 7.1% year-over-year), housing prices have not come down in Deschutes County. However, transactions have dropped significantly since 2021. As mortgage rates decline, buyers re-engage the market, applying upward pressure on already inflated prices. With the strong buyer demand from new residents coming from expensive out-of-town communities, there is a strong possibility Bend has been "found." The work-from-home dynamic has likely been a contributing factor.
In Crook County last week, there were six sold homes at a median of $437,497, with five price changes at a median reduction of -4%. In 2021 there were twelve sales with the median sale price at $422,500 and four price drops at a median decrease of -2.73%. Crook County sees a different price dynamic than Deschutes County. Remember that the higher-priced homes in Brasada Ranch and Powell Butte significantly skew the median sale price in Crook County upward.
Jefferson County had three sales in the last seven days, with the median sale price at 344k, compared to the 2021 median of 304k and ten sales. There was one pending sale in Madras (Jefferson County) last week, a newly built home that reduced the asking price by -23.44% before getting an offer! The bifurcation in Central Oregon real estate between Bend and the outlying areas is apparent and likely to continue. While low inventory could begin applying upward pressure on home prices in the communities surrounding Bend, there appears to be a limit on what buyers can or are willing to pay.
If I were to predict the real estate market for 2023, it would be low inventory and firm prices in much of Deschutes County, with a milder impact in Crook and Jefferson County. I completely understand your position for those who think more pain is on the horizon for home prices. However, real estate has typically been a solid investment in recessions, and the lack of distressed sellers today is reaffirming that scenario. Although, I reserve the right to be wrong!
Click here for the full report.
Whatever your beliefs about housing, having a knowledgeable agent is critical in today's market. So contact me today for a real-time, personal evaluation of your options.