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Happy New Year! Can you believe it is 2023? At the start of last year, many thought 2022 would be a reprieve from the madness of 2021. Of course, whether that is true depends on your perspective, but there is no doubt that the year ahead will be unpredictable in real estate and economics.
Single-family homes for sale in Deschutes County declined over the previous week to 612 from 669, a trend that is likely to continue through spring and early summer. One of the big questions on everyone's mind is what home prices will do in 2023. Since low inventory keeps prices firm, so far, the early indicators show stability in pricing. However, that is easier to quantify by looking back over the last couple of years.
In recent history, the last "normal" year was 2019, with 4248 sales at a median sale price of 425k. The median price reduction in 2019 was -3.65%. 2020 was a mix with pandemic restrictions taking effect in the spring, followed by a month of slow sales, before taking off in unprecedented fashion. 2020 ended with 5326 sales and a median price of 465k, a 9.4% increase from the previous year. Price decreases in 2020 were modest at -2.7%. 2021 was all about skyrocketing prices, with sales barely lagging the last year at 5256. The median sale price in 2021 was 603k, with the corresponding median price decrease at -3.82%. However, most sellers were getting their asking price, or in many cases, much more, reflected in the 29.7% increase from the last year! Finally, 2022 ended with a more typical sales volume of 4122 and a median price decrease of -5.14%. Price appreciation was still robust at 12.77%, although well below the astronomical increases of 2021.
What do these numbers show for the year ahead? First, of course, another factor to watch is mortgage interest rates. The 30-year national average for fixed-rate mortgages stands at 6.45%, more than 3% higher than one year ago. The rate spike undoubtedly played a role in fewer sales for the year, but buyer demand remains at pre-pandemic levels. Moreover, since the climb in interest rates, sellers have adjusted with price reductions and, in some cases, accepted offers below their asking price. Although, even with price reductions, prices were up over the previous year. The national reporting mentions rising inventory. However, in Central Oregon, that has yet to be the case. Whether the economy has improved or inflation is under control remains to be seen. The resilient home-buying public has adjusted and remains engaged in the market. Without a significant drop in buyer demand and a corresponding increase in homes for sale, there will be little downward pressure on home prices. We also are at a point where mortgage rates are relatively stable, even if they increase slightly over the next few months. Many buyers have accepted today's rates and have resigned to paying more until rates decline in the future when they can refinance. A healthy volume of cash buyers, immune to rate increases, remain in the market.
While I've mostly ignored home price appreciation predictions for 2023, I'm prepared to offer my own Central Oregon prediction after analyzing the numbers above. I anticipate a 9% appreciation in 2023 over 2022, in line with pre-pandemic trends. While it is possible homes for sale remain low and push that number over 10%, my gut tells me interest rates will keep appreciation in check. If available homes for sale increase significantly, I will adjust my prediction to 7%. Considering all of the information in this report, my predictions are hardly groundbreaking or putting me on a limb. Suppose all the factors slowing the housing market continues, and the economy falters. In that case, my long-term assumption points toward less appreciation in 2024, but that is too far out to predict, considering how the market has been behaving lately!
For all of the new readers of this report, I give my take weekly on Central Oregon real estate statistics, primarily focused on Deschutes County. Of course, I also track Crook and Jefferson County, but Deschutes is the largest pool of data that provides the most insight into developing trends. So stay tuned for hyper-local information, and feel free to reach out anytime you need a hands-on analysis tailored for you. Also, check out my Testimonials page to see what my past clients have to say!
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