When I shared the above quote from Mohamed El-Erian on my Facebook page in February 2021, the term "rational bubble" struck me as a telling sign of things to come. In the past I have been skeptical of the use of "transitory" to describe our current economic environment, and none other than Mohamed El-Erian had some insight. Yesterday, El-Erian wrote an article titled "Supply chain issues add to stagflationary winds" in the Financial Times. From "rational bubble" to "stagflation" in six months! The Financial Times article speaks of supply chains that may not directly impact the housing prices of existing homes, although new construction housing is undoubtedly affected. The long-range forecast for Central Oregon housing remains strong, and with real interest rates strongly negative, asset purchases (houses!) are a wise choice. While primary residences are generally not viewed purely as investments, many buyers purchase second homes or income-producing properties to take advantage of today's low rates.
Inventory dropped slightly this week in Deschutes County, with 634 homes for sale compared to 644 last week. Expect inventory to modulate up and down somewhat through fall and up to the onset of winter weather. Rising inventory is good news for buyers, while sales were down last week (101) compared to 170 sales this week last year. Keep in mind that the sales for the second week of September 2019 were 97, so our recent trends are more typical than last year's hot market. The thirty-year fixed-rate mortgage was almost unchanged this week at 2.88%, continuing to give buyers an opportunity to lock in record-low interest rates.
