Pending sales have increased in Crook, Deschutes, and Jefferson Counties since my report last week. Jefferson County has seen the most significant pending sale volume since I started tracking the county statistics last July, with eleven pending sales. Crook County also had eleven pending sales and a median price reduction of only -1.23%. Pending sales in Deschutes County increased by sixteen to seventy-six, with thirteen median days on the market and a median price reduction of -3.55%. However, inventory increased in Deschutes County to 611 single-family homes, an increase of forty-one from the previous week. Crook County's active listings increased by two, and Jefferson County decreased by seven. Growing inventory in Deschutes County is a seasonal, welcomed trend, while Crook and Jefferson County housing supply remains abnormally constrained.
With the national average for a 30-year fixed-rate mortgage increasing to 6.68% yesterday afternoon, assuming the housing market is slowing would be reasonable. However, Central Oregon real estate left reasonable in the dust three years ago and is moving quickly. With rare exceptions, testing a seller's price results in getting an offer rejected while another buyer gets the home. Additional time searching for a home will always present a different mix of properties, but finding a lower price for comparable homes has not materialized. In the large majority of situations, waiting results in paying more.
Large West Coast cities are the source of a large majority of transplants to Central Oregon, and the policy and quality of life trends in those areas seem to be driving more and more people to the greener pastures of Deschutes County and the surrounding communities. Last week, California defaulted on a $20B unemployment insurance loan from the Federal Government. Instead, it elected to pass the repayment costs to businesses, increasing the unemployment tax from .6% to .9%, likely accelerating the trend of companies closing stores and leaving the state. While the large corporations leaving California are not coming to Central Oregon, situations like this and many other policy decisions have driven those that can work from home to our communities. There is no indication of slowing buyer demand.
With higher mortgage interest rates, it would be reasonable to assume that out-of-town buyers are flooding the market with cash offers, but of the sixty-four closed sales in Deschutes County over the last seven days, only twenty were cash sales. Buyers financed the remaining forty-four deals with conventional, FHA, or VA loans.
Even though I have correctly predicted all of the last ten Federal Reserve Rate increases, I have no unique ability to guess what might be up its sleeve over the remainder of 2023. But I won't let that stop me from sharing my opinion! I've read and heard many arguments on the street that the Fed will pivot toward lower rates and that inflation is under control. Any regular readers of this report can guess I don't see it this way. So I'll leave inflation alone and let you use your grocery and gas bills to determine. However, I believe a pause is a more likely scenario than a pivot. While it may be possible that a slight softening of the overnight rate occurs before year-end, I would not count on a significant reversal in Fed policies and a return to the zero interest rate policies of the recent past. Instead, I believe that a pause and stability in Fed policies will positively impact mortgage interest rates, with a possibility of high five percent mortgages after labor day. A 50 basis point rate decrease will undoubtedly help buyer affordability, but this is not the windfall many are counting on. Buyers' willingness this spring to finance at today's rates and prices indicates what to expect in the months ahead.
The primary driver of Central Oregon buyers is quality of life and the desire to be here long-term. Although, no buyer wants to purchase in a declining market. At the high end, many home sales appear to be an investment decision and a lifestyle choice. Educated buyers would not be snapping up high-end properties in anticipation of a decline in value. Two issues are keeping our prices firm, 1) Central Oregon has a limited pool of available homes divided between smaller areas and price points, and 2) many buyers are leaving areas with equal or more expensive real estate. Many of today's buyers are undaunted by our prices.
While the sales gap from 2022 to 2023 continues to narrow, it likely won't invert until late in 2023 and may not surpass last year. Looking at Deschutes County YTD sales, the median price in 2023 is 635k, down from 694k in 2022. The average sale price went from 831k to 769k. Home prices today have stabilized, and there is a strong chance that the price gap from last year will narrow by year-end. Median and average mean little when looking at individual properties; sellers are in a strong position today. Testing home prices with low offers opens the door for other buyers circling the same property. Unfortunately, a low offer gets shopped to other potential buyers who know what price to beat to get the home. Multiple offers on a single property are increasing, and the best odds to get the home you want come from a strong offer upfront.
To quote Jim Carey, "So you're saying there's a chance!"
All kidding aside, contact me anytime you need help navigating our real estate market.