Last week I mentioned the inventory of single-family homes as a future indicator of home prices for the start of 2023. Since mid-October historically has been the peak of listed houses before tapering into winter, significant increases or decreases from this point until year-end are telling. For example, this morning, there are 890 single-family homes listed in Deschutes County, down from 908 last week. Some of the declines consist of sellers withdrawing from the market, although with fifty-six pending and eighty-four completed sales, the market is still reasonably active. Pending sales were in the seventies before the last significant jump in mortgage interest rates and even higher when rates were closer to 5%. With the national average for a 30-year fixed-rate mortgage at 6.92%, according to Freddie Mac, and 7.15%, according to Mortgage News Daily, there is no question that the increase in borrowing costs is impacting the market. The 505 price reductions out of the 890 actively listed houses indicate the effect of mortgage rates on home prices. This week, the sold homes had a median price reduction of -6.34%, while the pending sales median reduction was -7.85%!
Calculating price decreases from total inventory sold doesn't account for variations in the mix of properties sold, but it does show the overall trends. While it might be easy to assume all of the recent price drops are making homes in Deschutes County more affordable, a look at last year's numbers reveals a different story. From January 1, 2021, through October 19, 2021, there were 4242 sales at a median sale price of $599,700. During 2022, there have been 3507 sold homes at a median of $690,000! Despite the recent price reductions, homes are still more expensive this year than last. A declining home market takes time to materialize. While rising mortgage rates and inflation have taken a bite out of affordability, enough qualified buyers remain in the market to keep prices firm. The "golden handcuffs" of a sub-3 % mortgage keep many would-be sellers on the sidelines, and the decreased inventory is another factor propping up home prices.
A clear indication of the bifurcation of the real estate market shows in high-end home sales in 2022 compared to 2021. From January 1 - October 19, 2021, forty-nine sold homes over $2.5M with a median number of days on the market of seven, a median sale price of $3.1M, and eight price reductions of a median amount of -9.16%. In 2022 there have been fifty sales above $2.5M, with fourteen median days listed at a median sale price of $3.15M. Not only have sales of higher-priced homes increased along with prices, but the price decrease of the ten homes that took a price cut was only -5.33%! For anyone that has kept an eye on homes for sale above $2M, it is apparent prices have increased for excellent properties.
As we navigate higher interest rates and inflation appears to be embedded, there is little doubt there will be impacts on the housing market. However, the outcome may not be what many are expecting. Comparing trends to the Paul Volcker era of the Federal Reserve may be more appropriate than the housing crash of 2008 when inventory ballooned, and buyers disappeared. Housing, viewed from a long-term perspective, typically provides the best outcome for buyers, and the market dynamics today have not changed that analysis. Waiting out the market is likely only to add time and frustration, as it is impossible to say how long it will take for all the current dynamics to work themselves out.
Contact me for a thorough analysis of your options in the Central Oregon real estate market!