We attended the 2018 Bend Chamber of Commerce Real Estate Forecast Breakfast last week and the takeaway message was that for 2018, we can expect, well, more of the same. The keynote speaker this year was Paul Bishop, Vice President of Research at the National Association of Realtors (NAR). According to Dr. Bishop, nationally “prices will continue to rise and a shortage of homes will continue to keep a lid on sales volume.” This is precisely what we are seeing in the Bend and Central Oregon real estate markets. Home values have consistently risen over the last 5 years and low inventory has resulted in quick sales and a very competitive market.
Although interest rates are expected to rise, Dr. Bishop did not think the increase would be dramatic. NAR predicts the 30-year fixed mortgage rate will stay at 4.4 percent in 2018 and rise to 4.8 percent in 2019. While that sort of increase likely won’t impact buyers in the higher price ranges, it could tip the scales for many first-time and entry-level buyers.
A recurring topic was affordable home ownership in Bend. Geoff Harris, Regional Director of Hayden Homes, pointed out that the median income for Bend is around $60,000. In order for someone to purchase a home and maintain the recommended debt to income ratio of around 30%, they shouldn’t spend more than about $262,000. Right now in Bend, there is only one home for sale under $275,000. Clearly, that’s a problem. Why don’t builders simply build more homes in the entry-level price points to fill this void? As Geoff pointed out, land in Bend is expensive right now, labor and materials are expensive, and builders have to pay SDCs (system development charges) of around $25,000. The margins are very small. New construction does presently make up 43% of all active listings and in 2017, 26% of all sales. The problem is that during the recession, Bend lost a lot its tradespeople and construction workforce and the construction of new homes stalled. While new construction is now robust, we have a huge void to fill.
Lorelei Juntunen, a partner at ECONorthwest, provided statistics and data on both the real estate market and the economy. In 2017 24% of sales were cash deals, while 64% were purchased with conventional financing. The remainder were FHA, VA, or other loan types. Oregon and Bend, in particular, face an additional hurdle when it comes to low inventory. Thanks in part to all of the “Best Of” lists Bend has been included in, we are a top relocation spot. Since 2012, Oregon has been classified as an inbound state, which means there are more people moving to the state than out of the state.
Panelists touched on the topic of another real estate bubble and potential crash. The consensus was that the current market conditions are very different than they were in 2005 and 2006. It’s more difficult to qualify for a loan today. We don’t have an oversupply of housing like we did then when we had nearly 12 months of inventory. Today we have less than 3 months of existing supply. Nationally (and locally), we’re still not building enough homes to keep up with housing demand. The unemployment rate is low, income growth in Oregon is topping the U.S. rate, and an overwhelming majority of Americans want to own a home.
Additional panelists and speakers included our very own Molly Brundage, Principal Broker at Total Property Resources, Bill Kuhn, Bend Market President of First Interstate Bank, Jay Lyons, Partner and VP of Sales at Compass Commercial Real Estate Services.
The Bulletin provided a nice summary of the presentation. If you’re a subscriber you can read it here: http://www.bendbulletin.com/business/6030521-151/real-estate-forecast-housing-shortage-will-continue