This morning, the national average for a fixed-rate conventional mortgage is 6.77%, the lowest in two weeks. The number of homes listed for sale in Central Oregon is at its highest level in several years, and price decreases are prevalent as sellers attempt to position themselves for a sale before the seasonal slowdown in activity. It is no understatement to describe this as the best buying conditions in some time. Yet, despite the fantastic selection and motivation of sellers, I hear a lot of talk about waiting for mortgage rates to decline. For the record, I do not anticipate a significant drop in rates until 2027. If you read the forecasts of major banks, you will see that I am not alone in my assessment.
For reference, the monthly payment difference on an $800,000 loan between 6.8% and 6% is ~$325/month ($4,714 vs. $4,379), while the payment on a $900,000 loan at 5% is $4,406. The chances of rates decreasing to 5% before 2027 are increasingly small, but a drop in rates to 6% would unquestionably bring a wave of buyers to the market. Across the board, home prices have remained stable through the period of higher rates. An increase in demand, which would lead to a decrease in supply, will inevitably result in price increases. Taking all of this into consideration, it is clear that the swing in potential monthly savings is smaller than many might imagine.
Supply is beginning to wane in Deschutes County, as fewer new listings hit the market, and buyer demand picks up heading into fall. This morning, there are 1,563 single-family homes listed, down by nineteen from last week. A total of 81 pending sales, averaging $958,039, occurred this week, with more than half (47) reducing the list price before securing a contract. The average price reduction for the pending sales was -7.13%. Sixty-nine transactions closed this week at an average price of $811,239, with an average price negotiated down by 4.69%. In many cases, price reductions compound, with a list price decrease followed by a negotiated price below the asking price, resulting in a discount of more than 10%.
Crook County supply decreased by one to 247 single-family listings. Six pending sales are averaging $620,650, with an average price decrease of 10.21% before securing a buyer. Three closed transactions occurred at an average price of $417,665, with an average negotiated price 11.37% below the list price. Two of the three closed sales illustrate the type of scenarios I am seeing in today's market: one home originally listed for $472k, dropped the asking price to $430k, and closed at $420k, while another started at $499k, decreased the list price to $430k, and closed at $418k. Those sales represent 11.02% and 16.23% total decreases!
Jefferson County inventory remains steady, increasing by one this week to 120 single-family listings. One pending sale at a list price of $317,950 showed a price increase of 0.63%, a figure not uncommon for new construction. The builder may have added central air or some other feature that increased the asking price. Three transactions closed this week at an average price of $516,333, with an average discount of 9.55% below the asking price.
The prices buyers are negotiating, combined with sellers dropping the list price on homes, are significantly helping buyers' bottom lines. Mortgage interest rates are only one piece of the puzzle, and not always the most important one. If you purchase a home at a lower price because of favorable market conditions, and refinance the loan when rates decrease, the average cost per month over the time you own the property will decrease. This strategy enables you to capitalize on a lower sales price today and potentially lower rates in the future.
Using the example above of a home purchased for $800,000 and financed at 6.8%, the increased cost of ownership over two years compared to a 6% mortgage rate would be $8,040. If my example holds, and the same home would cost $900,000 once rates decrease to 5%, it would cost you $91,960 more to purchase the property. Using a 20% down payment, the $900,000 would mean an additional $ 20,000 in down payment. I cannot emphasize enough how favorable the conditions are today!
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