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May Real Estate Market Update

The spring market has been a bit of a head scratcher so far. The median price has bounced around a bit, the median days on market has dropped dramatically, and the number of homes for sale has ticked up. So what does this mean as we head into summer, let’s take a look at the data and see if we can pick up any clues.

Mortgage Rates

There is no question that mortgage rates continue to be one of the biggest factors in keeping buyers (and sellers) out of the market right now. Recent inflation and jobs reports have sent signals to the Federal Reserve that perhaps they should continue to carefully watch the market before starting to cut the Fed Funds rate. Although this isn’t a direct indicator of mortgage rates, the two do have some correlation. Given this, despite some recent downward movement in mortgage rates, they have continued to hover between 7-7.5% for most borrowers. Here is a snapshot of what interest rates have looked like over the past year.

One thing that is worth noting here is that although rates have continued to hover in the 7% range, we have seen an increasing number of financed transactions in the market over the last few months. We are almost back to 75% of the purchases being financed, which is in line with what we have historically seen. What is notable is that back in January we were at only 63% of the purchases being financed. What this tells us is that high rates can in fact keep some buyers on the sidelines, but when rates remain high for a longer period of time, buyers become accustomed to the rates and adjust their parameters so that they can move on with their plans.

Median Price 

As was the case last year, the normal, more smooth pattern of price movement that we had become accustomed to in the years leading up to the pandemic has gone away. The biggest part of this is that there are many fewer sales happening and therefore when a large number of sales take place at the extremes, it pushes or pulls the median accordingly. Last month we saw a 10% increase in the median month over month, and this month we saw a 5% decline. Right now the median for a Bend single family home is just over $700k, and this is up from $650k at this time last year. When you look at the chart below, it is hard to clearly see the normal yearly trends, but when we zoom back from the data and look at it as a rolling average, we see that normally the yearly high for the median price is set between now and July. Part of this comes from the fact that there are usually the largest number of sales in the higher price points in the spring and summer, and so naturally this pulls the median higher. We will be keeping our eyes on all of this to help determine when the high may come this year.

Days on Market (DOM)

As expected, the days on market continued to fall this past month. From March to April the median fell from 40 to 20 days, and from April to May, it fell to 12 days. A big part of this is that in the last few months we saw a large number of homes going pending within a week of being listed. Normally we see about 22-25% of the pending homes selling within a week, but for the last couple of months that had ticked up to about 35%. As these homes closed, they pulled the median days on market lower. However, it is important to note that the average days on market is still hovering in the 50 days, so this tells us that there are still a number of homes that are closing after many months of being on the market. We bring this up to help set expectations correctly and clearly outline what is happening. The fact is that homes that are well priced, well presented and well marketed can still sell fairly quickly, but this isn’t the case for all homes as buyers have been very patient if there are objections to overcome.

Pending Sales 

In April, we saw 254 pending sales for single family homes in Bend. This was up from 230 in March and almost identical to last April. In fact, the trend in pending sales this year has been almost step for step what it was last year, and so from that vantage point, things look consistent and “normal”.  However, this is really the “new normal” as when you compare these numbers to those from before the pandemic, we see that there were normally 350-400 pending sales this time of year. This really shouldn’t come as a huge surprise, as we know interest rates and market movements over the last few years have caused the number of transactions to drop. As long as inventory remains relatively in check and consistent, we can expect the number of transactions to remain in this range and tick up slightly over the next couple of months, before slowing down as we head into late summer and early fall. Normally we would see a tick up in the fall before dropping into the winter, but with the election on the calendar for early November, that uptick in fall activity might be delayed. More to come on this in future updates.

New Listings

New listings have been slightly outpacing what we saw at this time last year. We saw roughly 400 new listings in April and will likely increase for May. As with the number of pending sales, year over year numbers are relatively consistent, but when comparing it to this time in the years between 2017-2019, there were closer to 500 new listings in each of those Aprils. Again, we appear to be creating a new norm, where although the pattern of when we see peaks and valleys holds true, the levels of those trends appear to be changing.

Some other points to consider…

Much like with interest rates where buyers have to get accustomed to rates well higher than the 3-4% they had been accustomed to, buyers and sellers alike have to start looking at the current norms and resetting expectations for how many homes will sell, at what prices and how long it will take to sell them.

Sale to List Price: This has remained steady and is currently at an average of 99.1% of list price. For perspective, the median sale has spent two months in a row at 100%. Also, for additional perspective, the average sale to original list price is 97.4% with the median at 99.6%.

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, but after two strong months, we saw a significant decline this past month. This pattern isn’t uncommon, so let’s not read too much into it, but know that we will be keeping an eye on things here as well.

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. 

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Our agents write often to give you the latest insights on owning a home or property in the local area.

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