Am I the only one that can't believe the first week of February is over? As the new year chugs along, the housing market shows signs of what is in store for the first half of the season. Most analysts and real estate insiders have assumed that the Federal Reserve will lower the overnight rate banks charge other banks. And, in turn, mortgage rates will fall. Some even believe multiple rate decreases are in store for the year. The pivot speculation all hinges on Jerome Powell's statement in early December about the Fed starting to talk about when a rate pivot might happen. I've read several publications that have phrased it as the "Fed's December pivot," which is interesting considering the Fed did not lower rates in December nor at last week's meeting. Powell said the likelihood of the Fed being confident in the data by the March meeting to justify a rate decrease is extremely unlikely. If that holds, that pushes the earliest chance for a decline to the April 30-May 1st meeting. Even if the Fed drops rates at the end of April, anything more than 25 basis points is overly optimistic. This morning, the 30-year national average for a fixed-rate conventional mortgage is 6.96%. So much for the pivot scenario!
Generally speaking, lower rates keep prices firm or rising, as well as low inventory. In Deschutes County this morning, half that equation is in play, with 558 single-family listings, down eight from last week. This week last year, there were 510 active listings, indicating that higher rates are helping to increase available inventory, although not enough to drop prices. Prices this week for the fifty-four pending sales and thirty-eight closed transactions are similar to last year, at an average of $728,124 and $881,175, respectively. Pending sales this week are down ten from last year's week, while closed transactions are up twelve.
While sales volume is consistent with this time of year, the strong buyer demand is not as readily apparent in the data. The median pending days on the market in Deschutes County were forty-nine last week and thirty-eight for closed transactions. However, looking at the mix of properties buyers have taken action on shows several homes under contract that have lingered for some time. As our inventory remains low and buyers are motivated to secure a property and move on with their lives, many choose to take action with not necessarily the most desirable properties. New sellers are optimistic about the coming peak selling season as the inventory is continuously sorted and filtered with sales and new listings. Without inventory growth, the season looks very similar to our recent past, with more buyers than sellers and firm, if not increasing prices.
Crook County saw a modest increase of five listings, with 107 single-family homes for sale. Five pending sales and seven closed transactions rounded out the week at an average of $399,178 and $513,785, respectively. Still, inventory is down twenty-six from this point last year.
With the large majority of the real estate industry convinced that a rate decrease is the solution, along with a propensity to brush off any indication that they might not get their wish, it is unlikely much will change in the first half of the year. I expect Wall Street and most analysts to continue looking forward to a pivot in Fed policy while accepting the data about a strong economy at face value. If the Fed holds rates at the April meeting, many analysts will use that as evidence that a pivot must be in store soon, and if the Fed lowers rates by 25 basis points, they will rejoice that the pivot is here. Once rates finally decline, you can be sure the message will be to buy now before prices increase further. To be sure, prices have done just that over the last few years, with the housing unaffordability index at all-time highs. BTFD!
In Jefferson County this week, like Crook County, inventory increased modestly, now at eighty-three single-family house listings. Two homes are pending, with one sale. Prices this year are in line with last year's week, although volume last year was double with four pending sales and two closed transactions, which is negligible considering the typical modest transaction volume for the county. This week last year in Jefferson County, only sixty-eight single-family homes were listed.
There are two critical factors to consider when evaluating Central Oregon real estate. First, how long is your timeframe? Whether that is the time before you purchase or how long you plan to be in your Central Oregon home, these are essential questions to answer. If you can afford today's payment, eventually, rates will soften, and a refinance will make sense. Candidly, I don't expect that to happen in 2024, and I don't see 3% mortgage rates anytime soon. But rates below 6% are likely in the next couple of years. Don't let higher rates today discourage you from moving to Central Oregon if the timing is right. I encourage you to keep close contact with your lender, as rates are highly volatile. Second, when the right home comes up, take action! Especially with today's limited inventory, finding the right home can be tricky. Many properties have more than one buyer circling, and waiting can mean the difference between securing a great property and starting the process over again.
Lastly, for home prices to decrease, inventory needs to increase. Our supply-constrained market shows no signs of a large influx of homes for sale. The longer it takes for inventory to stop the seasonal decline, the more frantic the peak buying season. If you choose to wait for more options in the market, make sure your financing is in order, and your lender has what is needed to produce a pre-approval letter at a moment's notice. When buyer competition is intense, you will not have the luxury of taking your time with an offer, and you can be sure other buyers will be ready to take immediate action on a home that suits their needs. The market factors are becoming old news for anyone who has been looking for a while, as this year is shaping up to be very similar to last.
If you are interested in how 2023 shaped up compared to 2022, my report last week detailed the last of the Central Oregon communities on my list to review and links to all the previous year-end reviews. In a nutshell, sales were down roughly 25%, and prices were down about 5%. My year-end reports show the precise community numbers for those focused on a specific part of Central Oregon.