Seasonally, we are entering a time of year when sales and new listings slow. However, that doesn’t mean that buyers aren’t out there, and it is important to remember that there can be opportunities for buyers and sellers during the winter. With the election behind us, it feels like people are getting back to discussing what they need in a home. We have seen signs of continued strength in the market, and let’s take a closer look at the monthly data to shed some light on what we can expect in the coming weeks and months.
Mortgage Rates
Mortgage rates continue to be the primary driver of activity and sentiment in the market. The experts have been calling for mortgage rates to drop, but a sustained drop has yet to emerge. Leading up to the Federal Reserve meeting in early Sep, mortgage rates were dropping and approaching 6%. However, despite a Fed rate cut in Sep and another in November, we have seen mortgage rates do nothing but drift higher.
As with everything we will discuss, it is important to zoom out a bit and look at some of the other trends to see what we can expect. First, the experts are all still calling for rates to drop over the course of the next year. Second, if you look at the last two years, you can see that rates peaked in the late Fall and early winter and then proceeded to drop about a point over the course of a few months. If this plays out again, I think it is safe to say that many of the buyers who have been hovering on the sidelines will be stepping in to take advantage of the opportunity. If this does happen, the increased activity could put upward pressure on prices, and so it would be wise to talk to your broker and create a plan that allows you to be ready for (or better yet ahead of) the expected trends.
Median Price
After a number of months in a fairly consistent range, we saw the median jump dramatically last month. It increased by about 10% for single family homes in Bend and now sits at $815,000 and near all-time highs. Given the discussion about rates ticking up and prior discussions about activity slowing around elections, you may be wondering how we could see a 10% jump in prices. To answer this, we have to look at the breakdown of the data and keep in mind what this data point is showing us. We need to keep in mind that the median price in October comes from the closing of homes that went Pending in September. So although you are seeing “prices go up in October” it is really data that is lagging by about 30 days. If you remember back to our prior market updates, we talked about how in the first couple of weeks of September, we saw a large spike in the number of ultra luxury ($3M+) homes going pending. This trend continued to other price points as well, and we saw a large uptick in sales above $1M over this stretch. As we discussed repeatedly last year as well, with a shrinking number of sales, and a bigger proportion of them coming at higher prices, this combined to drive the median significantly higher. We have seen this same scenario play out to the downside in times when the luxury market slows and lower price points pick up steam. We would not be surprised to see a correction in the median in the coming months, as pending sales in the upper price points have been slower in the past few weeks.
New Listings and Homes for Sale
As we head into what is typically the slower season in the real estate market, we usually see the number of new listings dropping. However, despite the overall trend lower during Q3 and Q4, there is often a slight pause to this decline that takes place in the Fall. We saw this last month with a slight uptick in new listings from September to October. Although part of this is a seasonal trend, the uptick in listings could likely be because when sellers saw rates ticking down in early September, this finally got them off the fence as well. Why would a drop in interest rates convince someone to list their home? The answer is that sellers are generally buyers as well and for the owners who have low existing mortgage rates, they don’t want to sell when they know that they have to pay a significantly higher interest rate on their future purchase. However, when rates fall and the gap between what they have and what they will get closes, they can justify making the move. This is precisely why when people ask us what we expect when mortgage rates fall, we say that it really depends on the balance between buyers and sellers getting into the market.
Although there was an uptick in the number of new listings, and also an expected down tick in the number of sales, the number of homes for sale fell. This is because sellers, who have not been able to get what they want for their house, often take a pause for a few months or pull their home altogether. In October in Bend, we saw 99 homes get canceled, expire or withdrawn from the market. For a little perspective, that number was 55 in October 2023. We think this is likely due to the combo of election uncertainty and the recent moves upward in interest rates, and we will have to wait until the new year to see when (or if) they come back on the market.
Pending Sales
The number of homes that went pending in October remains fairly strong for this time of year. Although it did decline from 257 in September to 234 in October, we are still significantly higher than what we saw at this time in 2023 and 2022. If you remember, at this time last year, interest rates were approaching 8% so this had buyers sitting tight, and although we have seen an uptick in the past month, rates are still over 1% lower than at this time last year. What is really encouraging is that despite an election looming, activity in October remained relatively strong, which shows that buyer demand is still present despite the uncertainty.
Days on Market (DOM)
We continue to see an upward trend here, but this is inline with the cyclical pattern we would expect. The average days on market right now in Bend is 65 and up slightly from last month. The median jumped more significantly, but this almost certainly is related to the discussion we had on the uptick in the median price. Luxury listings often take longer to sell and with a larger than normal number of them selling, this pulled up the median days on market along with the median price. Overall, it feels much like it did last month, when buyers have a healthy amount of time to shop. However, it is important that we don’t hear these numbers and think that every home will sit for a few weeks before selling. Keep in mind that about 21.5% of the current pending homes went pending in less than a week. Homes that resonate with buyers and are priced, presented, and marketed well can still sell quickly.
Some other points to consider…
Sale to List Price: This has remained steady and is currently at an average of 98.5% of list price. Here is a chart of this over the past few years. Please keep in mind that this is the sale to last list price. If you take into account sale to original list price (price before any price reductions), this stat dropped to 94.5%. Again, the uptick in sales of luxury homes, many of which with large price reductions, dramatically influenced these numbers.
Inflation: This is a big indicator for the Fed and although the Fed cut their lending rate early in Nov again (this time by .25), inflation remains above the Fed’s target of 2%. You can see a chart of inflation here.
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.
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