Central Oregon Market Report

Have 6%+ Mortgage Rates Impacted Housing?

"There are decades where nothing happens; and there are weeks when decades happen" - Vladimir Lenin

With gas prices in Central Oregon approaching six dollars a gallon in many locations, mortgage rates at 6.23% for a 30-year fixed-rate mortgage, and the May Consumer Price Index coming in at 8.6%, the last several days felt like a week where decades happened. Even more concerning for inflation, the Producer Price Index came in at 10.8% for May, a leading indicator for future inflation numbers. Today the Federal Reserve Open Market Committee meets to determine how much to raise the Overnight Rate. While the overnight rate does not directly correlate to mortgage interest rates, it is the cost of doing business for banks. Just like higher producer prices increase the cost of goods (inflation), higher lending costs between financial institutions equate to higher financing costs trickling down to consumers.

Although, lately, the trickle-down to consumers has been more like a firehose. The Federal Reserve plays a game called forward guidance. This strategy began in the early 2000s to telegraph to the public and financial institutions what they were likely to do regarding interest rates. When forward guidance was notifying institutions of lowering interest rates to near zero, the information was taken as a reassurance that the Fed was helping to right the ship to save the economy from the worst effects of a recession. Today's forward guidance does the exact opposite, warning of rising rates and tightening monetary policy. In the best-case scenario, this guidance allows markets to "price-in" the rate increases before the actual increase. When the changes are moderate and in line with expectations, the markets react with calm indifference, and there is a smoothing effect that reduces jolts in the market. While many experts expected a lower CPI print and a 50 basis point rate increase in the overnight rate, when inflation came in higher than expected, mortgage rates shot up almost immediately to over 6%. This morning Mortgage News Daily shows the national average for a 30-year fixed-rate mortgage at 6.23%. Now, many experts either predict or hope the Fed raises the overnight rate 75 basis points to gain the upper hand on inflation.

Further, the forward guidance suggests 50 basis point hikes in the July and September meetings. Can we expect 7$/gallon gas and 7% mortgage interest rates by late summer? Unfortunately, what seemed unrealistic now is closer to reality.

How has this impacted housing in Central Oregon? Most likely not in the ways most people would expect. At the same time, inventory grew to 705 single-family homes in Deschutes County, and pending sales increased by five to 88 listed homes going under contract. The median days it took to find a buyer dropped by two to eight days, and the number of price changes decreased by one to twenty-six. The median price change for pending sales dropped from -6.45% to -4.96%, further bolstering that proper pricing is essential in this housing market, and accurately priced homes sell quickly. Although the median pending price dropped from 750k to 699k, changes from week to week are not enough to establish a trend. In fact, of the sixty-eight sold properties in the last week, the days on the market dropped from five to four, with the median list price at 677k and the median sale price at $700,500! Buyers that closed last week paid a median of $23,500 more than the asking price! Of those sold homes, the median price change was -2.85%, down from -5.08% last week. The pending sales are down from prior weeks, but eighty-eight homes finding buyers in the previous seven days is a substantial number.

Will housing prices begin to drop? For homes relying on buyer financing, the higher mortgage interest rates will likely have an impact. But, several factors are preventing a rapid decline in pricing:

Our inventory is still half of what would have been considered normal in years past.
Many homeowners have mortgage interest rates below 3%, with tremendous equity.
With the financial markets taking a beating, real estate remains one of the few attractive investments.

With so many people relocating to Central Oregon, buyer demand has exceeded homes for sale by such a large margin that it is difficult to see a price crash. Also, at this time in the selling season, sellers have time to wait it out and see if they can get a sale, providing little motivation to slash the asking price. While fall financial conditions may bring about more price reductions, there is little doubt that most correctly priced homes will find buyers over the next several weeks.

The remaining question is," How many homes will you watch get sold before you make your move?" No matter your opinion on the market, I am ready to work for you to make your goals a reality.

Property Search Links

Buyers and sellers alike need accurate, up-to-date information to make informed decisions. The Market Trend Reports I provide on EnjoyBendLife are a fantastic way to see how the active inventory of home prices is trending. These reports are updated on Sunday of each week, giving you insight into more than just the number of listed and sold properties. Click the links below or sign up to have a specific report emailed directly to your inbox. Once viewing the Market Trend reports, use the search box to enter any city in the country for the same data. These reports provide invaluable information for out-of-town buyers that need to sell a home in their community before moving to Central Oregon. Please let me know if you have any questions about interpreting this information.

Investor Search

Market Reports linked below show the active, pending, and sold properties for communities throughout Central Oregon, providing yet another powerful tool at your disposal on EnjoyBendLife. If a corner of Central Oregon you are interested in is listed below, click one of the links and view the reports. Or, use the Market Reports Tool and select your criteria for more specific information, such as subdivision, county, or city. You can choose to have these reports emailed directly to you at your desired frequency. Any Market Report you choose is updated every fifteen minutes, so you will always be on top of the market!