It always surprises people to hear how weather-driven the real estate market can be at this time of year. With the shift toward feeling like spring in the past week, we have seen real estate activity pick up, and we feel poised to enter a very busy few months. The data we track often tells us what has happened, but if we look at the number of conversations we are having with buyers and sellers, that helps us understand what is about to happen. Although it clearly can’t tell us what to expect in terms of prices, it gives us a sense of the supply and demand, and from that, we can advise our clients and create a gameplan. Let’s see what the data shows and what we are hearing.
Mortgage Rates
Mortgage rates continue to be the biggest topic on most people’s minds. Although they came off highs of around 8% in November and retreated as low as about 6.5% in mid-January, they spent a good portion of February slowly rising back up to about 7%. In the first couple of weeks of March, they have started to tick down again, now hovering around 6.75%.
Here is a snapshot of what interest rates have looked like over the past year. As you can see, we are almost exactly where we were at this time last year.
There have been expectations that the Fed will begin cutting the Fed Funds rate, but with inflation remaining steady and even ticking back up over the past couple of months, the Fed will be cautious in their decisions. They have seen good progress with regard to inflation over the past 18 months, but they don’t want to make a move that causes this pattern to reverse, moving away from their goal of 2% inflation. Despite all this, mortgage experts still believe that rates will be lower by the end of the year, with most expectations around 6%. As we have said before, the tricky part is that if a buyer stays on the sidelines waiting for rates to drop, the following factors come into play:
- The largest number of homes available usually occurs over the next few months. Waiting until the end of the year might get you a lower rate, but your selection of homes will almost certainly be greatly diminished.
- As rates come down, more buyers will enter the market, creating more demand and potentially higher prices.
We will discuss mortgage rates and their potential impact on the number of sellers in a later section.
Median Price
As was the case last month, the median price has ticked down slightly again and has been on a somewhat steady decline for about 6 months. Although some may point to this as a sign of a changing market, we would like to remind our clients that this is a normal part of the cycle in Bend’s market. We fully expect the median to begin ticking up this month and to continue rising for some time. According to MLS data, the median price is currently at $710,000, which is up from $675,000 at this time last year. Typically, the median price moves higher until about June/July and then tends to taper off in the second half of the year. This pattern occurs because demand is at its highest in the spring and early summer, creating upward pressure on prices. Also, generally speaking, the largest number of luxury homes come onto the market in the spring, as those sellers are often able to delay their sale for several months to coincide with the peak period of buyer activity. This influx of luxury home sales skews the data, thus causing a rise in the median price. It’s common for people to place too much emphasis on the median price as the ultimate indicator of market appreciation, but it’s important to understand the underlying reasons for its movement. As we have mentioned before, with so few homes on the market, the data set is small, and variations in sales for any given month can cause significant fluctuations in these metrics.
Days on Market (DOM)
As was the case last month, the time homes take to sell in Bend remains within the normal range observed over the last decade. At the end of February, homes were taking an average of 71 days to sell, with the median days on the market being 47. We would expect that the days on the market will decrease over the next few months as sales activity picks up. Often, the longest days on the market occur at the turn of the year or early in the year, as some of those homes that have been listed for a while and went pending in the winter are finally sold.
One very important data point that should not be overlooked (and is very much a leading indicator) is the number of homes that are currently Pending in less than a week. Here’s a quick recap:
- Over the last year this had been hovering around 21-23%
- Last month it was 27%
- Right now it is 37%
With 102 of the 272 Pending sales in Bend under contract in less than a week, I think it is safe to say that demand remains strong.
New Listings
As we expected, the number of new listings continues to tick up, and in fact, we had the exact same number of new listings in February as we did last year at the same time. This trend often continues until mid-summer, so for those buyers who have been waiting for new inventory, it appears that this is happening. For sellers, there is definitely some psychology around waiting for the right time to list. This time of year, sellers will consider the timing of spring breaks in the area, Easter, and when things start to green up to plan their listing accordingly. We love having these conversations with our sellers, as there are many factors to consider and no blanket statement as to the perfect timing. If you have been considering selling and want to discuss how to maximize your timing, please give us a call.
Pending Sales Given all the topics we’ve discussed up to this point, it should come as no surprise that pending sales are continuing to tick up as well. In the years leading up to the pandemic, we often observed the largest number of pending sales occurring in April and May. Since the pandemic, this trend seems to have shifted slightly later, with June being the peak month in two of the last three years. It remains to be seen which month it will be this year, but what we can tell you is that, with 37% of homes selling within a week right now, we expect the number of pending sales to remain strong. One factor we have consistently observed over the past year is buyers waiting for something to prompt them into action. We have already discussed how interest rate drops have motivated people to make a move (see ‘Buyer’s Corner’ in our latest State of the Market report). However, we would argue that another significant factor is buyers’ fear of overpaying; they wait for validation that prices are reasonable. When they observe that properties are selling in a specific area or price point, they receive confirmation that they are not alone, which boosts their confidence and, consequently, sales. As mentioned earlier, with properties going pending within a week 37% of the time currently, our expectation is that buyers will receive the validation they need, indicating that the market remains steady.
Some other points to consider…
Sale to List Price: This ticked up slightly and now stands at an average of 98.9% of list price.
Inflation: We touched on this earlier, but thought including the chart here would allow you to see and track this as well.
Building Permits: This helps us track what to expect in terms of new construction that may be in the pipeline. In February this number more than doubled from 25 to 53, so this could add some new inventory to the mix later this year.
We hope you find this information valuable and that it helps you towards your ultimate real estate goals. If you have any questions about this month’s content or would like to dive a little deeper into the data, please reach out to your Ladd Group broker. If you don’t have one, you can reach me at steve@bendpropertysource.com or on my cell at 541-280-2132.
There are also several ways to reach the team, so please let us know how we can help.
- facebook.com/bendpropertysource/
- Bendpropertysource.com
- info@bendpropertysource.com
- 541-633-4569
- Main office: 650 SW Bond St, Ste 100
- Tetherow Sales Office
- Assembly Office in Northwest Crossing
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