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Inventory of single-family homes in Deschutes County increased eighteen to 667 this week, while Crook and Jefferson Counties were flat. Deschutes County homes for sale are up 12.7% from last year, nowhere near enough inventory to dampen prices significantly. Price reductions of the actively listed homes in Deschutes and Crook County are in the low four percent range and only -2.6% in Jefferson County. There were five pending sales in Jefferson County, down two from last week, and ten in Crook County, up four. Nevertheless, Deschutes County had a robust eighty pending transactions, up five from last week.
Deschutes County Properties
Mortgage rates have been increasing lately, with the 30-year fixed-rate national average yesterday afternoon at 7.01%. On April 17, 2023, the national average was 6.68%, a likely contributor to only 46 closed transactions this week. However, only 525 homes were for sale on April 12, 2023, another contributing factor to the lower closed sales. Despite the high rates, only fourteen of the forty completed transactions this week were cash deals.
Many experts incorrectly assumed that the last Fed Open Market Committee meeting would have paused rate increases, followed by a pivot to lower rates. Instead, as we now know, rates increased by 25 basis points. There is a strong chance that the Fed will pause rate hikes at the next meeting on June 14, but the likelihood of a pivot over the next four meetings of 2023 is increasing low. Minneapolis Fed President Neel Kaskari recently said, "What's important is not signaling we are done...(and we) may need to go north of 6%." St. Louis Fed President Jim Bullard said, "I think we are going to have to grind higher with the policy rate...to return inflation to target. I'm thinking two more moves this year...I've advocated sooner than later." If either of these thoughts becomes a reality, my prediction of rates in the high 5% range by Labor Day was, unfortunately, incorrect. JP Morgan CEO Jamie Dimon said, "Everybody should be prepared for higher rates from here...(the Fed) could push rates as high as 7%." The rates mentioned in these quotes refer to the overnight rate, which is currently at 5.25%. Using Kaskari's number would indicate another 75 basis point increase and 175 basis points using Jamie Dimon's prediction. If these narratives become a reality, there is a strong chance mortgages could approach 8% by year-end.
Crook County Properties
Under normal market conditions, higher rates would slow sales, and the inventory of available homes would naturally increase. Unfortunately, normal set sail long ago. Homeowners are financially strong today, with many sitting on 3% or less mortgage rates. As we have experienced for the last few years, today's market is supply constrained, not awash with buyers. The active buyers have the means to purchase under these conditions and are motivated to make Central Oregon home. As a result, prices have remained firm. There have been more multiple-offer scenarios, but the bidding wars of 2022 have dissipated, with most multiple offers resulting in contracts at the asking price or slightly above.
Comparing the year-to-date numbers of 2022 and 2023 illustrates our supply-constrained market perfectly. In 2022 through May 24, there were 1732 sales of single-family homes in Deschutes County at a median sale price of 690k and five days on the market. In 2023 through this morning, we have closed 1080 sales at a median of 635k and twenty-seven days on the market. In normal conditions, a collapse in sales volume of 37.6% would translate into significantly increased days on the market and robust price reductions. However, the 55k price reduction indicated in the YTD comparisons hardly matters due to substantially higher mortgage rates. Using the median sale price of 2022 and 2023 and mortgage interest rates from March of each year of 4.86% and 6.58%, respectively, shows an increase in monthly payments of $400 for this year.
Jefferson County Properties
It would be easy to interpret my report this morning as "doom and gloom," but there are always opportunities in turbulent economic conditions. Moreover, each transaction has unique factors that need individual analysis. Lenders are getting more creative with the programs available as rates increase. Cash buyers are in an even stronger position than in the last few years of competing with well-qualified buyers accessing historically low mortgage rates. The dearth of inventory has disproportionately impacted the lower price points, but many sellers are offering owner-carried contracts to sell in these conditions.
The takeaways apply in any market but are especially important today:
1) Stay in close contact with a responsive lender that can tailor a loan program to fit your needs.
2) View real estate with an extended timeframe, and don't get hung up on short-term volatility.
3) Ensure your real estate agent has local knowledge of the markets and lenders that can help.
Deschutes County over $2M
Unfortunately, there are no indications that a wave of homes will hit the market, bringing prices down substantially. Also, particularly for younger buyers and first-time homeowners, do not buy thinking you need to check every box! While it is true that people are owning homes longer than in years past, the likelihood that you will have the same mortgage or home for thirty years is extremely low. Getting a "foot in the door" now will provide options in the future that waiting will not.
Whatever your situation, I have experienced it and have the expertise to help you make an educated move. So whether you need to buy or sell this summer or plan a post-retirement move in five years, I can help. Or, use the many tools on my website to track the market, like Market Trends, Market Reports, or the Home Valuation tool. You will not find a more comprehensive website or weekly Central Oregon housing market analysis!
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