My Weekly Central Oregon Real Estate Blog

This morning's big news in real estate is that mortgage interest rates declined to 6.61% for the national average of 30-year fixed-rate loans. While that might not seem all that low, it is much better than the 7.22% rate just several days ago. For buyers that are fighting an affordability battle, every little bit helps! 

In other news, sales of single-family homes in Deschutes County remained steady, with fifty-three pending sales last week and sixty-one sold single-family dwellings. Since a decline in September, the price of sold houses has also remained consistent, with the previous week's median sale price at 620k. Of course, median sale price bounces around based on the specific properties sold, but until September, when mortgage rates spiked, the median price of sold properties was trending in the low 700s. 

Price reductions still comprise more than 50% of active and sold properties, a trend that should continue into the remaining days of 2022. Inventory declined, as expected, to 801 single-family homes in Deschutes County, with 450 of those listings reducing the price since becoming active. The median price reduction of the actively listed homes stands at -6.42%, although the number may vary depending on the particular property. 

I primarily rely on Deschutes County single-family listings and sales to follow the trends since that is the most extensive data set in Central Oregon. However, Crook and Jefferson Counties are bucking Deschutes County trends with a slight increase in actively listed properties. Jefferson County added seven listings this week (83 to 90), and Crook County added three, bringing the total this morning to 144. Prices in these counties have also moderated more than in Deschutes County, with the median sold-to-original list price in Crook County at 89.86% for seven sold houses. There was only one sale in Jefferson County last week, with the sold-to-original price showing a steep decline of 71.34%. For reference, the sold-to-original list price in Deschutes County was 93.65%.

It is hard to believe there are less than 30 business days between now and the end of the year. Any contracts from this point forward will most likely be closing in 2023, and just like that, we are wrapping up 2022! As many listed properties expire before year-end, some sellers withdraw their homes from the market until after the holiday season. Although, with many motivated sellers and a slight reprieve in mortgage interest rates, the next several weeks favor buyers the most in 2022. When the available homes are in short supply, prices tend to firm up, making the next few weeks an excellent opportunity for buyers. Watching how many homes hit the market in spring 2023 will be a strong indicator of home prices for the coming year. 

Now is a great time to utilize the Market Trend Reports on my website and the other available tools. Remember, market Trend Reports only show the active inventory of single-family homes and condos, with either category selectable by you. In addition, these reports do not include new construction, giving you focused insight into where the market is moving. If analytics are not for you, don't hesitate to contact me for a more user-friendly analysis of homes and neighborhoods pertinent to your needs. 

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Inventory of active single-family homes for sale in Deschutes County dropped by one in the previous week to 821, down one from the week before. Week to week, we are witnessing a gradual slowdown in sales and prices, although the changes are drastic compared to last year. For example, in 2021, during the Wednesday to Wednesday of the first week of November, there were 121 sold single-family homes at a median sale price of 635k, with 37.2% of the sold properties reducing the price to secure a sale. During 2022, there were 47 sold homes at a median of 570k, with 55% of those listings reducing taking a price cut to make the sale. Undoubtedly, a 30-year fixed-rate mortgage interest national average of 7.21% has significantly impacted buyers, along with overall costs increasing across the board. In addition, a healthy dose of winter weather may also influence buyers' purchase decisions. 

Last week, the median price change of the closed properties was -8.01% or $52,500 on the median sale price of $570,210. Coincidentally, that is the lowest median sale price since 2020, with all indicators pointing towards lower prices in the future. Lower prices are good news for buyers today despite higher mortgage interest rates. For buyers looking to purchase in the spring of 2023, the sales volume and sale price decrease are bearish for the coming year, although there is a strong chance mortgage interest rates will be higher than they are today. There is much talk about mortgage markets pricing in rate increases in advance of Fed overnight rate hikes, and relatively stable rates over the last several weeks may be indicative of that idea. Although, with inflation stubbornly high and a notably hawkish press conference with Jerome Powell after the previous FOMC meeting, don't be surprised if markets are caught off guard by future Fed policy. 

A long-term focus when purchasing real estate is the best approach, and a home you plan to own for several years that you can afford today should remain a consideration. However, for anyone with doubts about future income or a shorter duration of expected ownership, waiting to see where the economy and housing end up is a solid plan. For cash buyers, there is little doubt that you are in a strong position today and into the future. Any investors considering a purchase have a rental increase cap of 14.6% for 2023 to offset any concerns, with rentals still far fewer than applicants. 

As always, I can help, no matter your needs or concerns! I am intimately familiar with the Central Oregon real estate market and have tools you can use whether you plan to buy before year-end or well into the future. 

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Yesterday, Central Oregon received another dose of winter weather, indicating a great start to building an early snowpack. With daytime temperatures mostly above 30 degrees, the roads in Bend and Highway 97 weren't bad, with slush or wet pavement making up most of the day. Although, most of last week was mild, which may have contributed to robust activity in the housing market. Fourteen more houses were pending last week compared to the previous week at sixty-nine, while thirty-one more homes sold for a total of eighty-three. The median pending sale price was 649k, and the median sale price was 639k, increasing over the previous week.   Inventory across the country is rising, but in Deschutes County, the most significant drop in homes listed this year occurred, with current active listings of single-family homes at 822 compared with last Wednesday's 877. With the 30-year fixed-rate mortgage at 7.09%, an increase in pending and sold properties is bucking the national trends. As I have mentioned over the last few months, the inventory of homes listed for sale will be the best indicator of where home prices are heading.

Contrary to much nationwide reporting on the housing market, Deschutes County prices remain firm despite higher mortgage interest rates. Still, more than half the actively listed homes have reduced the price by a median of -6.35%. Even with the price reductions, home prices are up over last year. On April 20, 2022, there were 333 single-family homes for sale in Deschutes County. If the volume of homes for sale decreases that much this spring, expect Central Oregon home prices to buck the nationwide trends and stay firm. Although, with interest rates likely to climb further, there could still be a price correction that hasn't been readily apparent to date. 

Recently, I've read several reports that state inflation has peaked, deflation is on the horizon, and to expect declining rents. But, for those focused on Deschutes County, our local dynamics may differ regarding rents. For example, rent increases in Oregon cap on a percentage plus CPI, and the rate for 2023 is a whopping 14.6%. Contrast the maximum rent increase in Oregon with recent reports from Zillow and Redfin of rents declining by 5%, and it is easy to predict a different reality locally. In addition, since the rent cap law began in 2019, many landlords have increased annual rent by the cap amount, which was between 9-10% over the last couple of years. This reality should be a call to action for both renters and investors! Many renters face future rents that approach or exceed a mortgage, making homeownership wise despite rising interest rates. For investors, any fears of capped rent increases should be relieved knowing that the rate of increase is well above CPI, or property taxes which are limited to 3% increases per year. Potential home buyers taking action today can lock in a rate that might very well be lower than rates during 2023 and, at some indeterminate point in the future, refinance when rates decrease. Interest rate decreases down the road are almost inevitable, while a decline in home prices, considering our limited availability of homes and strong buyer demand, is no guarantee. If analysts touting our strong economy and employment numbers are correct, home prices could increase. Stating that we are in uncharted territory is the understatement of 2022! 

I strongly encourage anyone reading this report to take advantage of the tools available on EnjoyBendLife.com and contact me with any specific property questions. Home prices are impacted differently at the various price points, and not every neighborhood is experiencing increases. Consequently, it always pays to analyze the market segment that pertains to you. Data is your friend in today's market!

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This morning in Sunriver, the first snow of the year is on the ground! It may only be an inch, but all signs indicate a more significant winter than recent with a predicted La Nina weather pattern. As expected,  active listings are down to 877, a decrease of thirteen from last week. Between winter weather, Thanksgiving right around the corner, and rising interest rates, the reduction of homes for sale is not surprising. What is surprising is that nationwide actively listed homes have increased. Rising inventory at this time of year could indicate lower prices this spring as fewer buyers are stepping up to purchase despite 503 price reductions in the actively listed homes. Last year there were one-hundred-twenty-three sold properties from October 19th through the 26th compared with fifty-two this year. Considering the inventory reduction, sellers seem to be waiting out the market rather than the decline attributable to solid buyer activity. With mortgage rates above 7%, there is little doubt that increased borrowing costs are taking a toll. Two unknowns as we wind down 2022 and look ahead to the 2023 real estate season will be mortgage interest rates and home prices. Many real estate analysts predict flat home price appreciation and reduced rents for next year. 

For the buyers still actively looking for homes, price reductions and accepted offers under the asking price are becoming more prevalent. Staying in close contact with your lender is essential, as rate volatility is dramatic. Another thing to remember is the difference between property tax in different homes and its impact on closing costs. Keeping your lender updated on the house you are considering will prevent any unpleasant surprises at closing. Oregon property tax increases are capped at 3% per year unless you purchase new construction. Remember, property taxes quoted on new construction listings are based on the vacant land tax and will increase to the assessed value at closing. Therefore, a newly built home's property tax will likely be more than an older home at the same price. Ask your lender to run the numbers on specific homes you are considering to avoid surprises. 

While rates are increasing borrowing costs, price reductions are helping to keep payments in check. For example, a home purchased at 600k, paying 5% in mortgage interest, has roughly the same payment as a home purchased for 550k at 6% interest or a 500k house at 7% interest. This morning there are 326 single-family homes listed in Deschutes County that are at or below 600k, giving you plenty of options! Mortgage interest rates may stay elevated for some time, but when rates decrease, a refinance could save you hundreds of dollars per month. In many cases, the opportunities to purchase a home well below the asking price offset higher borrowing costs. No matter what your price range, staying engaged in the market will give you a chance to find your perfect home at a reasonable price! Please do not hesitate to reach out if you are ready to tour properties and see for yourself. 

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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! 

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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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