This year in Central Oregon, real estate will be much like it was in 2017, according to Paul Bishop, vice president of research at the National Association of Realtors.
Prices will continue to rise, and a shortage of newly constructed houses will continue to keep a lid on sales volume, Bishop said. “It’s not very satisfying to say ‘more of the same,’” Bishop said during his keynote speech Thursday at the Bend Chamber of Commerce Real Estate Forecast breakfast, held at Riverhouse on the Deschutes. “But it is more of the same.”
There were 3,211 homes sold at an average price of $466,926 in the Bend area in 2017, according to an annual summary compiled by ECONorthwest for the Central Oregon Association of Realtors.
ECONorthwest did not calculate a median, which would have been a lower figure excluding the highest-price transactions.
In the Redmond area, there were 1,289 transactions at an average price of $315,626.
There is one big change on the horizon — rising interest rates — but Bishop downplayed the effect that will have on the market. The National Association of Realtors predicts the 30-year fixed mortgage rate will stay at 4.4 percent in 2018 and rise to 4.8 percent in 2019.
“The increase isn’t alarming at this point,” he said. “It’s something that’s got consumers’ attention.”
The mortgage rate hikes won’t have a big enough impact on monthly payments to dissuade most people from buying, Bishop said.
Bishop thinks price appreciation, averaging 6 percent a year since 2012 for the United States, will have a bigger impact on consumer demand. That’s showing up in existing-home sales, he said. Sales slid for a second consecutive month in January and saw their largest annual decline in more than three years, the National Association of Realtors announced Tuesday.
January sales were down 3.2 percent from December to a seasonally adjusted rate of 5.38 million. Last month’s sales were also 4.8 percent lower than January 2017.
The good news, Bishop said, is that people very much want to own homes. In a national survey of renters, 79 percent said they want to own a home at some point. When Americans are asked whether their “American dream” includes homeownership, 85 percent say “yes,” and more than 80 percent say that’s a strongly held belief.
Before the real estate bubble, first-time home buyers accounted for about 40 percent of sales, Bishop said. That’s down to about 30 percent. And first-time buyers face challenges apart from a lack of inventory. Nationwide, student loan debt, typically about $30,000, is a main concern for renters, and it tends to push back home purchases by five years, he said.
Closer to home, first-time buyers are competing with people looking for second homes and investment property, said Molly Brundage, principal broker at Total Property Resources. First-time and investment buyers often are shopping at the same price point, but investors are well-capitalized, she said.
Buyers using all cash accounted for 25 percent of transactions in Central Oregon in 2017, said Lorelei Juntunen, partner at ECONorthwest. That’s higher than the national average of 22 percent, she said, but below the recent peak of 33 percent in 2011.
Seven years ago, cash buyers were finding deals in a down market, she said. Those buyers are paying more per square foot of house. “They’re using their cash offers to compete in a very, very tight market,” she said.
Another sign of Bend’s tight real estate market: There’s almost no price premium for new construction, Juntunen said. In 2011, newly built homes commanded 46 percent higher prices than existing homes. Today, that difference is 0.5 percent, she said.
Juntunen conducted a poll of the forecast breakfast audience, which was mostly real estate agents and bankers, on their outlook for 2018. Fourteen tables said they expected improvement, while 35 tables said they thought it would be stable. Juntunen said she agreed with the majority opinion.
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