Central Oregon Market Report

Weekly Market Conditions

The national average 30-year fixed-rate mortgage hit 5% for the first time since February 2011, when rates were declining from a high of 7.18% in March of 2002. Besides a brief spike to 4.94% in November 2018, mortgage interest rates have been highly favorable to buyers for over a decade. While the Federal Reserve System (Fed) does not set mortgage interest rates, there is a specific correlation between the rates the Fed charges banks for overnight loans and what we as consumers pay when we buy homes. While the early 2000s saw rates becoming more favorable, this time, we are witnessing affordability decline without much of a clue about where rates will peak. Although, with soaring inflation, the Fed has telegraphed rate increases throughout 2022. The Federal Open Market Committee meets eight times a year, with the next meeting scheduled for May 3-4th, followed by meetings in June and July. While the Consumer Price Index came in above predictions at 8.5% in March, the Producer Price Index hit 11.2% at the end of March. The PPI is a precursor to CPI, an unfortunate indicator that inflation isn't going away and will accelerate. These inflation numbers give the Fed very few options, and Federal Reserve Governor Lael Brainard has telegraphed a rapid sell-off of the Fed's balance sheet, which consists of bonds and mortgage-backed securities, along with a 50-75 basis point (.5-.75%) increase in the overnight rate. Since mortgage rates do not move in lockstep with the overnight rate, it isn't easy to ascertain where rates may end up by the peak summer real estate season.

But won't higher mortgage interest rates bring down home prices? Unfortunately for the buyers waiting for a downturn, our limited inventory of homes for sale has altered that dynamic. Not only are buyers making more cash offers, but many homeowners also have fixed-rate mortgages at or below 3%, providing little incentive to sell and take on the task of finding another home. Without a significant increase in homes for sale, it isn't easy to imagine crashing home prices. While new properties are coming to market regularly, the inventory of single-family homes for sale decreased this week, and as of this morning, there are 333 homes listed for sale. Contrast the homes for sale against 100 pending contracts in the last week, and 73 sold shows buyers remain supremely motivated to purchase real estate.

In these market conditions, buyers must focus long-term when searching for suitable properties. The Fed's rate increases and corresponding mortgage-rate increases intend to slow the economy to lower inflation, hopefully with a "soft landing." The equivalent of slowly letting the air out of a balloon when your only available tool is a pin. What happens when the US economy goes into recession? Many analysts believe the Fed will lower rates again, making these increases "transitory." While rate decreases may be the outcome, the result is likely stagflation, a blending of stagnation and inflation. Precarious is an appropriate adjective to describe the current economy. All of these economic factors place a premium on choosing properties that are an excellent fit for your needs long-term.

Whatever your views on what happens next, I am always available to help strategize an appropriate plan for your unique situation!

Realty ONE Group Discovery

I recently joined the Realty ONE Group Discovery team in Bend, Oregon! My priority is providing the best service possible for my clients, and I couldn't be happier with the tools and support available with my new partnership. Located on the Big Deschutes River banks and just down the street from the Hayden Homes Amphitheater, our office location matches the firm's quality. In addition, my email, phone number, and website are unchanged, so all of your contacts for me remain the same. In addition to the great resources at EnjoyBendLife.com, I look forward to providing even more tools to help you whether you are buying or selling property in Central Oregon.

I look forward to continuing to help you with all of your real estate needs!