My Weekly Central Oregon Real Estate Blog

Energy, food, and producer costs play an outsized role in inflation numbers on the eve of the September report, available tomorrow. Some analysts predict a .5% core inflation increase, all but assuring the Federal Reserve raises rates again in November. With the 30-year fixed-rate mortgage national average at 7.14% and expected to continue climbing, the housing market is reacting with fewer sales and more price reductions. As is typical, the smaller communities further from Bend are slowing first, with only one home pending in Jefferson County last week and two sold. In Crook County, eight homes were placed in contract, with four sold, although these numbers aren't too far from how the market has performed over the last several weeks in Crook County. Of the four sold homes in Crook County, the most expensive sale went at the full asking price of $1,595,000. The next, listed at $549,900, sold for $554,625, followed by a home listed at $354,000 that sold for $340,000, and lastly, a home listed for $299,000 closed at $270,000. These sales illustrate the uneven market we are experiencing throughout Central Oregon. Sellers in lower price points are lowering the asking price and negotiating with buyers, while sellers in higher price points can hold relatively firm. 

Home prices are elevated even with a steady stream of price drops and negotiations ending below the asking price. Consequently, how long you believe the Fed will turn the screws on inflation and keep rates high will directly impact how low you anticipate home prices dropping. However, July 1-October 12, 2021, and 2022 show how elevated prices are. For example, in Deschutes County in 2021, there were 1661 sales at a median price of $615,000 (average of $754,010) and 315 price changes of -4.51%. In 2022, there have been 1190 sales at a median of $689,950 (average $850,942), with 472 price changes at a median of -6.13%. Despite more and deeper price changes, homes are still selling for significantly more than last year. The inventory of homes listed in Deschutes County was unchanged from last week at 908. 

For the buyers reading this with no urgency, waiting will, in all likelihood, bring lower prices. Whether that is true across all market segments remains to be seen. Nevertheless, for those motivated to buy now, the opportunity to negotiate the price increases the closer we get to the winter holidays, and the more rates increase. With a long-term focus and purchasing a home you can afford, there is little reason to worry about how the market fluctuates after moving in. Homes appreciate over time, and that dynamic will not change over the long term. Although with the current volatility and the Fed now reversing their mandate of keeping unemployment low to one of actively pursuing tactics that will crush business growth, it would be foolish to brush off potential further price decreases. 

The quote attributed to Will Rogers still applies, "Buy real estate and wait, don't wait to buy real estate."

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While mortgage rates may have moderated slightly from last week, now at 6.65% for the national average of a 30-year fixed-rate loan, the market remains volatile. Moreover, with another 75 basis point increase expected from the Fed at the next meeting on November 1-2, 2022, There is every reason to believe loans will get more expensive by year-end. As a result, the housing market is cooling beyond what would be typical for the season, especially compared to last year. For example, from Wednesday, September 29, 2021, to the first Wednesday of October 2021 in Deschutes County, there were 150 sold single-family homes. Of the sold homes this week last year, the median days on the market were eight, with 45 price changes at a median of -5.84%. The median sale price was $614,750. Since September 28, 2022, through this morning, there have been 81 sales at thirty-nine median days on the market. Forty of the sold homes in the previous week lowered the asking price by a median of -6.43%. Tellingly for the sold totals moving forward, this week in Deschutes County, only fifty-five homes were put under contract compared to seventy-five the week prior. Even with the reduced sale volume, the median sale price this year increased by almost 50k to $662,500 compared to last year's week. Active inventory this morning stands at 908 single-family homes in Deschutes County. 

Nationwide, home inventory has increased sharply from the trend of the last several weeks, while there are fewer homes for sale in Deschutes County. Some of this is natural seller attrition in anticipation of the winter season. However, considering how mild the early fall has been, the decline is more likely attributed to sellers waiting out the market. Time will tell if Deschutes County lags the national trends or our market is experiencing a different dynamic. There is little doubt there are still people relocating to Central Oregon from larger cities, but our meager pending sales last week could indicate the future. Stay tuned to my weekly reports to stay on top of this and other essential metrics impacting our real estate market. Candidly, with the economy flatlining and mortgage rates climbing, I expect home prices to continue to decline. As mentioned several times this year, the unknown variable is available inventory. Midway through April 2022, there were only 333 single-family homes for sale in Deschutes County. If homes for sale reach those lows as we begin the peak of selling season 2023, it will place a floor on how low home prices go—assuming a reasonable volume of active buyers. 

If you are a cash buyer motivated to buy this season, there is little doubt that overall conditions are good. Although, not every home is a candidate for deep price cuts. Evaluating sold and pending homes in the neighborhood of your choosing and the days a particular house has lingered on the market will help reveal the likelihood of a seller taking less. I cannot stress enough how valuable the Market Trend Reports on my website are for this and the Market Reports tool. You'll find many Market Reports for specific neighborhoods and areas linked on my website, or you can access the Market Report tool at the top navigation bar of my site to set parameters. In addition, there are several popular reports at the bottom of this email. Either way, the information is up-to-date and extremely useful in helping you determine a strategy. If you need help deciphering and working with any of these tools, I am happy to give you my knowledgeable insight. If you desire a more specific analysis or want me to be your agent to help guide you through the process, I am available to run an in-depth report from our MLS and the tools on my site. You would be hard-pressed to find anyone that analyzes market data to the level I do weekly! 

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Jerome Powell and his cronies at the Federal Reserve have changed their tune dramatically in the last several months. But unfortunately, they also seem determined to crush our economy in the name of inflation-fighting while simultaneously printing money for the current administration's pet projects. Not surprisingly, our economy and the housing market are feeling the effects. For example, this morning, Mortgage News Daily shows the average 30-year fixed-rate mortgage at 7.08%, a rate not seen since July 20, 2001. In contrast, the Freddie Mac website shows a rate of 6.29% for the week ending September 22, 2022, an increase of .8% in just a couple of days. 

To put the rate change in perspective, a home at the median pending sale price in Deschutes County last week was $629,900, with $3,566 in annual tax and $50/month in HOA dues. A down payment of 20% would be 126k. At 4% interest, the monthly payment would be $2,836, and at today's rate of 7.08%, the amount jumps to $3,810! That is $974 more per month and $11,688 more per year. Remember when the Fed and others in our government said inflation was transitory? 

If rates come down significantly, a refinance of the loan would make ownership more affordable, but determining when and how much rates might decrease is anyone's guess. The Fed promised another 75 basis point increase in October and another 50 basis point increase in December. A few months ago, there was complete consensus amongst Fed board members that the overnight rate at year-end 2022 would be 1%. Compared to today's 3.08% and a projected year-end rate of 4.33%, to say the Fed is talking out of both sides of its mouth is an understatement. The Fed also seems unconcerned with crushing the economy, so lowering rates quickly to relieve the impact of recession seems far in the future when the current stated mandate is crushing inflation while they continue printing currency. As interest rates climb, the Federal Government's payments on our $31T (Trillion!!) national debt increase, but the debased dollar means they pay down debt with cheaper money. That calculus is beyond my frame of reference and irrelevant to most home buyers, but it does illustrate the difficulty in predicting what interest rates might do in the future. As always, I firmly believe that home ownership is a long game, and while rates may be up, home prices are declining, making the balance a bit more palatable. If you can afford a home today that suits your needs, it may still make sense to buy, especially considering rising rents. Also, the mix of more inventory and the seller's willingness to deal make this juncture appealing if you are a cash buyer. Although, there is little doubt that the market will continue to evolve as rates climb. As I have mentioned several times, the big unknown will be how many sellers choose not to list as they grapple with the "golden handcuffs" of a sub-3% mortgage. 

"It is important to remember that market cycles are always occurring. Markets go up and down. The reality is there's never really a perfect market - just the market you're dealing with when you're buying your home.

You'll rarely be able to time the market, but if you can afford what you buy and hold onto it long enough, the best timing will find you."

-Gary Keller, founder of the Keller Williams real estate brokerage

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The national average 30-year fixed-rate conventional mortgage yesterday was 6.47%, the highest rate since 2008. Unfortunately, with persistent, rising inflation, the Fed will raise the overnight rate at least 75 basis points again today, with some economists encouraging 100 basis points. The mortgage market has been pricing rates in anticipation of continued Fed increases. Still, I expect mortgage rates to increase further after today's announcement. Many local lenders have rates below the national average, and programs available allow borrowers to buy down to a lower rate. If you are considering a buy-down, have your lender run the numbers to determine if the additional cost is worth it for your situation. For example, suppose you believe that rates will decline in the next several months. A buy-down might not make sense in that case because a refinance would be available before long. Conversely, if you think higher rates are here to stay, a buy-down might make perfect sense, with rates persistently higher. Unfortunately, I have no particular insight into how long rates will remain at or above the current rates.  

The inventory of actively listed single-family-family homes in Deschutes County is up slightly to 921 homes. At the same time, pending sales dropped somewhat to seventy-three since last week. The sold volume was unchanged at sixty-eight homes. The median sale price was $727,450, with only 20 days on the market before going under contract. Contrast that with median days on the market for the active inventory of sixty-two. Well-priced, attractive homes are still moving quickly. At this time of year, inventory bounces up and down slightly before declining into winter and early spring. Still, indications point to fewer homes listed as we start 2023. Buyers have less competition, more time to consider a property in the current market, and a strong chance of securing a below-asking price offer. Considering all of these factors, if you find a home you can afford that suits your needs, it makes sense to purchase today. Waiting will likely produce fewer homes for sale as homeowners with low mortgage interest rates and considerable equity stay put. There continues to be more robust buyer demand than active sellers, keeping prices firm despite higher mortgage interest rates. Ten of the sixty-eight homes sold were priced below 500k, with twelve above $1M, showing that buyers of all stripes are still active. 

Not every seller will sit out of today's market, and those looking to sell find motivated buyers and firm prices. Please let me know if you need help pricing your property. Now is a great time to regularly refer to my Market Trend Reports to track home prices weekly by navigating to that page of my website or signing up for weekly emails sent directly to you on Monday mornings. 

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The median sale price in Deschutes County for the last seven days is $752,500 marking five consecutive weeks of increase. The days on the market for these sold properties have remained steady at twenty-three. Days on the market for active listings increased by two, now at sixty-one, the most days for actively listed homes in the last couple of years. Active listings also increased slightly to nine-hundred-thirteen, an increase of twenty from the previous week. I pull these numbers early on Wednesday mornings but depending on which day of the week or time, the active listings will change, and I wouldn't read too much into this increase. Nationwide, actively listed homes decreased again last week, with 547,122 homes for sale, a decrease of 1%. As a point of reference, in 2019, the last time the housing market behaved "normally," there were over 950,000 homes actively listed for sale. Last week in Deschutes County, five-hundred-eight of the actively listed homes reduced the list price by a median of -5.69%. Sixty-eight homes sold last week, an increase of three from the previous week, with thirty reducing the price by a median of -6.17%.

The consumer price index came in higher than predicted yesterday at 8.3%, remaining at forty-year highs. The higher-than-expected CPI print marks twenty-seven consecutive months of rising inflation and portends another rate increase from the Federal Reserve next week. Steadily rising inflation has many economists predicting a 100 basis point increase, an entire percentage point. In addition, CPI news increased the 30-year fixed-rate mortgage from 5.97% to 6.28%, the highest since 2008. While Fed rate increases do not directly affect mortgage interest rates, expect mortgage rates to experience continued volatility and more increases in anticipation of the subsequent Fed rate increase. 

Rental prices and availability are even tighter than homes for sale. With continued buyer demand, decreasing inventory, and few options for those relocating to Central Oregon, I expect prices to remain relatively firm through the remainder of 2022. That said, there have been many price decreases, particularly below the median sale price, creating some opportunities for anyone engaged in the market this fall. Additionally, many local lenders have mortgage interest rates well below the national average. All indications point to significantly fewer homes for sale in the spring of 2023 as home-sellers weigh their options and choose to stay put. As crazy as economic conditions seem, today may be some of the best buying conditions of the past couple of years, with most sellers willing to accept an offer below the asking price. If you are in the market for a mortgage, I recommend speaking with several lenders, as each company has different options and targets a specific type of borrower. 

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Pending home sales in Deschutes County in the previous seven days jumped to eighty-nine, an increase of twenty from the week starting August 24, on par with the more significant weeks for new contracts this summer. Not surprisingly, for the season, the active inventory of single-family homes decreased to 893 from 929. Inventory seasonally decreases heading into winter as sellers are less active, and buyers interested in closing before the end of the year start to look in earnest. Five-hundred-four of the actively listed homes have reduced the list price by a median of -5.41%, and the median days on the market continue to increase, now at fifty-nine days. An example of correct pricing in this environment is that the median days on the market for the sixty-five sold homes this week was twenty-two. The median sale price was 730k, and twenty-eight of the sixty-five sales agreed on a price below the list price. The median price reduction of sold homes last week was -7.28%. 

Mortgage rates continued to climb, with the national average rate for a 30-year fixed-rate mortgage now at 6.25%. A whopping 40% (26) of the sixty-five sales in Deschutes County last week were cash deals. The odds of the Fed lowering rates this spring are growing increasingly long, and there is little doubt that higher mortgage rates are impacting buyers, particularly in homes below the median sale price. Although, with a limited, decreasing inventory, home prices have remained firm, albeit down from the highest highs in 2021. For buyers actively engaged today, there are many opportunities to have an offer below the list price accepted. While the economy is waving many red flags, inventory will be the most significant variable heading into 2023. Without an adequate inventory, buyers will still be competing over a small number of properties that will keep prices high. Likewise, the stagflation plaguing the rest of the economy will impact housing prices without a significant number of new listings. 

Unfortunately, I do not expect housing stagflation to be even across all areas and price points. Typically, sellers of higher-priced homes retreat or hold firm during slowdowns, while homes below the median sale price must adjust for higher mortgage rates and lower affordability for buyers. With the housing affordability index in steep decline and real wages, those in charge seem to be engineering a "Wall Street vs. Main Street" scenario that punishes those below the median home price. I do not pretend to have any special skills in predicting financial markets, although the reports I am reading don't paint a particularly rosy picture. So how do these economic conditions change the scenario for a typical home buyer or seller? Of course, every situation is unique, but with even tighter conditions in the rental market and rising rents, buying still makes sense for those with a long-term focus. For sellers with a solid plan after the sale, prices remain elevated, and buyers are stepping up. Waiting for better buyer conditions may pay off, although, in this environment, the devil you know may be a better option than the devil you don't! 

Whatever your goals in real estate in Central Oregon, it never pays to work in generalities or to follow reports in the mainstream media. Every person is in a unique situation, and I am well versed in Central Oregon real estate and evaluating different buyer and seller scenarios. Please feel free to contact me anytime so I can help to give you a clearer picture of your unique options. 

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