If you believe the median price of a single-family home in Bend has risen as far as it can go, just wait.
The new year will see more of the same, thanks to the continued economic recovery, Bend’s popularity as a destination and the scarcity of land on which to build within the city, experts said.
“One of the primary forces on the local market is the desirability and livability of the region,” said Tim Duy, professor of practice at University of Oregon and senior director of the Oregon Economic Forum. “That is likely to be sustained into the next year. The fundamental forces driving that migration will still apply over 2016.”
Bend, the fourth-fastest-growing city in Oregon in 2014, attracted more than 2,800 new residents that year, according to the U.S. Census Bureau. It grew by nearly 10 percent between 2010 and 2014, according to the bureau.
About 6,000 people moved to Deschutes County in 2014 from outside the state, according to the Census Bureau. The bureau reported another 3,300 moved to the county from elsewhere in Oregon.
In many cases, new arrivals still find homes in Bend a bargain, said Lynnea Miller, principal broker at Bend Premier Real Estate.
According to the California Association of Realtors, the median price of a single-family home in San Diego County, for example, is $473,360; in Orange County, $660,890; and in San Francisco, $896,740. In November, the median price in Bend fell to $322,000 after peaking at $348,000 in September, according to the Beacon Report.
About a third of buyers Miller said her firm dealt with locally in 2015 paid cash. Competition, particularly among buyers with cash proceeds from the sale of a previous home, is contributing to higher home prices in Bend.
“Cash is king,” Miller said. “Cash over any sort of loan, cash still wins.”
A prospective buyer who relies on financing to purchase a home likely falls short if an appraisal for that home falls below the seller’s asking price, she said. On the other hand, cash buyers are constrained only by the amount of cash on hand. Repeated offers on the same property and cash sales contribute to higher appraised values, she said.
Higher appraisals, higher comparable values for surrounding properties, and higher costs to purchase land and to build are all pushing median home prices higher, Miller and others said. A scarcity of land on which to build in Bend is a familiar complaint, along with the added cost of system development charges. Development charges are fees the city attaches to new construction to underwrite the cost of infrastructure like sewers and street lights . Builders spend sometimes $100,000 before turning a shovel of dirt, said Luke Pickerill, marketing director for Clackamas-based builder MonteVista Homes.
“There’s an old rule of thumb. Land can’t be more than 30 percent of your project cost,” he said. “Right now you can’t buy a lot in the city of Bend for $80,000. If you can’t get a lot for the $228,000 to $320,000 (home) market, you price out a lot of affordable-home buyers. The average person who makes $42,000 a year can’t afford that. Who exactly are you building for?”
Pickerill said MonteVista, which is still building and selling units in Bend, is switching its focus to projects in the Willamette Valley. New projects in Bend may have to wait until they become profitable, he said.
“You have to kind of move where the markets are moving,” he said. “All the landholders (in Bend) are valuing the existing (supply of) land at values so high it doesn’t pencil.”
An entry-level home for a middle-income buyer doesn’t really exist in Bend anymore, Miller said. First-time homebuyers are buying in areas like Three Rivers, south of Sunriver, and commuting to Bend, she said. An entry-level home today in Bend is priced close to $300,000 .
The Bend metro area, which includes all of Deschutes County, ranked eighth of 271 metro areas nationwide for house-price appreciation in the third quarter, according to the Federal Housing Finance Agency House Price Index in November, the latest FHFA report available. Home prices in Deschutes County increased 13.18 percent for the 12 months ending Sept. 30; prices increased by nearly 59 percent over the previous five years, according to the FHFA.
Still, 537 homes priced between $250,000 and $300,000 sold in the 12 months ending in November, according to the December Beacon Report. At the high end, the most expensive 5 percent of homes for sale in Bend also experienced price appreciation, according to Redfin, an online real estate brokerage firm based in Seattle. While luxury homes elsewhere in the country saw a 2.2 percent price decline, in Bend those prices increased by 10 percent in the past year, according to Redfin. Thirty-nine homes priced at $1 million or more sold in Bend in the year ending in November, according to the Beacon Report.
“Emerging tech hubs seemed to take up a portion of this list” of cities where luxury homes are in demand, Redfin Communications Manager Amy Musser wrote in a Dec. 8 email. “The reason prices in Bend aren’t slowing could be attributed to a strong economy and a recent influx of tech talent.”
Continued prosperity, increased job security and growth in wages will continue to fuel demand for homes in boom towns like Bend, Duy said. The U.S. economy is expected to see continued moderate growth in the coming year, according to a Dec. 10 forecast by Zheng Liu, senior research adviser at the Federal Reserve Bank of San Francisco.
“It’s holding prices up and forcing construction at the higher end,” Duy said. “I don’t see where that problem is going to go away in the near term.”
However, talk of an inflated real estate market in Bend is premature, he said. Home prices in Bend, adjusted for inflation, can climb another 30 percent of today’s values before they reach the pre-recession peak in fourth quarter 2006, Duy said. The median price is the point at which an equal number of homes are sold below that price and above it.
Home sales fluctuate seasonally, with lower sales numbers typical in the winter in Bend. Nationwide, home sales numbers dipped in November, which the National Association of Realtors attributed to a change in federal regulations that require lenders to take more time to review closing documents. Brokers set closing dates out further as a result, said Miller, of Bend Premier Real Estate, and she expects a bump in sales to show up in December as a result.
She suggested buyers know their spending limit, have their financing in place and expect to fall short in two or three offers before succeeding with their home purchase.
“My concern is, personally, that I don’t want Bend to turn into an Aspen,” Miller said, “where the only people that can live here are wealthy.”
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