Buyers and sellers understandably have a lot of questions about the real estate market right now. While we don’t have a crystal ball, we do have the next best thing – 30+ years combined experience and educated local market insight, coupled with strong relationships with industry experts. These are our answers to the most common questions we have been hearing.
Are home prices going to come down more in Bend?
Buyers that are waiting for home affordability to improve may need to adjust their expectations. Multiple sources point to home prices stabilizing. Zillow’s home value forecast calls for home values to remain nearly flat through September 2023. Home prices in Bend peaked in March 2022 with a median price of $783,000 and they have gradually come down since then but the overall median home price has been bouncing around $680,000 since October 2022. Home values in NW Bend specifically have continued to increase over the last year. The initial price drop was tied to a rapid increase in mortgage interest rates and buyers pulling back. Homeowners reduced their list prices to incentivize buyers. As interest rates started coming back down we saw buyer activity pick back up and the number of price reductions decreased. Housing supply remains at near historic lows, causing buyers to compete for the available inventory, which results in higher prices. In order for home prices to come down significantly, we would need a surge of inventory but according to Zillow national data, overall inventory remains nearly 40% below pre-pandemic levels. That’s true for Bend as well. Even if inventory were to increase dramatically, we would still have a serious undersupply issue. Home prices fluctuate month-to-month and year-to-year and we switch from seller’s to buyer’s markets and back again but looking at home prices historically, the overall trend is up. Although the dip in the median is difficult for those that purchased at the peak, we believe that the lack of inventory will create price stability and minimize further dips. Prices drop when demand is met and we simply don’t have enough homes to meet the demand.
Median Sales Price of Houses Sold for the United States from 1965 – 2022
What’s going to happen with interest rates?
For those buyers waiting for interest rates to come down, experts have varying opinions on what to expect. Many believe that we already hit the peak and that as long as we continue to get positive news about inflation, we may see rates fall to around 6% by the end of 2023. Those with a more optimistic outlook are saying we could see rates dip below 6% but nobody is predicting rates will go as low as they were over the last few years. Rates will continue to be volatile and bumpy and would be borrowers need to be ready to jump if rates do dip. We ask our buyers what is more important, the interest rate or the monthly payment? For most of them, it’s the payment. They’re not necessarily waiting for the rate to get down to a specific number, they’re waiting for rates to come down to a level that makes their payment comfortable. Buyers that are still interested in purchasing today can consider a temporary rate buy down and in some cases, even ask the seller to contribute. There are advantages to buying when others are waiting it out, like less competition and the ability to ask for seller concessions like closing cost contributions. Buyers shouldn’t expect market conditions to remain the same if rates do drop. You won’t be the only buyer getting back into the market. You also need to have a property identified in order to take advantage of that lower rate and with inventory as low as it is, that’s not a sure thing. Trying to time the market by perfectly coupling a lower interest rate with the availability of the right house at the right price is nearly impossible and mortgage rate forecasting is difficult, even for the experts. Buyers have to do what makes financial sense and for many, affordability is an issue with current home prices and interest rates. For buyers that can still afford it, there are options for getting that lower interest rate today. While it can be hard to adjust your thinking about rates and what qualifies as high or low, the average mortgage interest rate looking back to 1971 is 7.75% according to Freddie Mac. Since the start of the Covid pandemic, the Fed has helped keep mortgage rates low by injecting billions of dollars into the mortgage market each month. Rates were always going to rise when the Fed stopped this program.
30-Year Fixed Rate Mortgage Average (7.75%) in the United States from 1970 – 2022
Should I wait to buy or sell in Bend?
The answer depends on what you would be waiting for and how long are you willing to wait? If you’re waiting for home values to drop or for interest rates to come down, there’s no guarantee that those things will happen. With inventory as low as it is and buyer demand remaining relatively high, we are not expecting home prices to decline appreciably. Interest rates are volatile and although they are projected to eventually go down, we can’t be certain as to how much or when. Many experts are saying that rates around 5.5% to 6.5% are likely “the new normal”. Purchasing a home is a personal decision and you should consider your financial stability and how long you intend to be in your next home. If you view purchasing as a long term investment you will likely weather any market fluctuations in the near future. If you find a home that you love and you feel comfortable with your payment, we don’t see a compelling reason to wait.
Molly Brundage | Principal Broker | 541-280-9066 | molly@brundagesmith.com
Cheri Smith | Principal Broker | 541-788-8997 | cheri@brundagesmith.com
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