Central and Southern Oregon Home Prices

❱ The average home sale price in the region fell .4% year over year to $599,486. Prices were 1.8% higher than in the second quarter of 2023.

❱ Compared to the second quarter of this year, average prices rose in Deschutes, Jackson, Jefferson, and Josephine counties but fell in Crook and Klamath counties.

❱ Prices in every county other than Jefferson fell year over year. Crook County saw the greatest drop.

❱ The median listing price of a home rose 3.6% compared to the second quarter of this year. All markets except Jackson County raised asking prices.

Mortgage Rates

Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.

With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Higher sales as well as higher list and sale prices suggest that the market still favors
sellers. That said, it’s unclear whether the market can continue to allow prices to rise
much more given that mortgage rates are unlikely to fall meaningfully in the near future.

As such, the needle stays in the same position as in the second quarter: favoring sellers, but only marginally.

Central and Southern Oregon Home Prices

❱ Average sale prices in the region rose 1.6% year over year to $591,581. Prices were up 11.6% compared to the first quarter of 2023.

❱ Compared to the first quarter of this year, average prices rose across the board. The Bend market showed the greatest increase, with prices up 9.5%.

❱ Three counties contained in this report saw sale prices rise year over year, while three fell. Prices in Crook County experienced a significant increase.

❱ Compared to the first quarter, median list prices rose 2.2%. All markets except Crook County saw asking prices rise.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Rising sales and home prices, shorter market time, and higher list prices suggest that the tide may have turned, especially following the very unimpressive data we saw in the first quarter of the year. With an uptick in inventory, I was happy to see sales rise even when faced with higher mortgage rates. The question going forward will be whether or not home prices will continue to increase with higher financing costs in place.

For the time being, it appears as if sellers have the upper hand. As such, I have moved the needle to show a market that is in their favor, but certainly not as much as it was in 2021 and early 2022.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Central and Southern Oregon Home Prices

❱ The average home price in the region fell 5% year over year to $549,850. Prices were down .3% compared to the fourth quarter of 2022.

❱ Compared to the final quarter of 2022, home prices rose in Crook and Jackson counties, but fell in the rest of the market areas.

❱ Home prices rose in three counties year over year, while they fell in three. The Bend market area experienced a significant decline.

❱ Median listing prices rose in Crook, Deschutes, Jackson, and Klamath counties, but fell in the other two counties compared to the fourth quarter of 2022. It appears the overall market has not found equilibrium yet.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Lower sales, longer market time, and lower listing and home sale prices tell me that buyers currently have the upper hand. As such, sellers have had to adjust to market conditions they haven’t seen in several years. That said, prices have pulled back a fair amount over the past two quarters. If mortgage rates approach the 6% level in the late spring/early summer months, it’s quite possible that the housing market will stabilize and home prices will start to rise again.

Given all the data contained in this report, I have decided that the market now favors home buyers. However, as I mention above, if stability is found, the needle will certainly move back toward sellers.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Central and Southern Oregon Home Prices

❱ The average home sale price in the region rose 1% year over year to $557,517, but it was down 8.4% from the third quarter of 2022.

❱ Compared to the third quarter of 2022, average prices fell in every county other than Jefferson, where they rose 3.4%.

❱ All counties contained in this report saw prices rise year over year, but prices in Deschutes and Jackson counties were essentially unchanged. It doesn’t appear that home prices have been significantly influenced by the increase in mortgage rates yet.

❱ Compared to the third quarter, median listing prices fell in Deschutes, Jackson, Crook, and Josephine counties, but rose in Klamath and Jefferson counties.

Mortgage Rates

Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.

My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Sellers are adjusting to the changing market, as shown by the drop in asking prices in several markets, though this is not the case everywhere. The spring market will be a bellwether for the housing market in 2023. It appears as if mortgage rates have peaked, which should be good news for home buyers. Furthermore, sellers lowered their listing prices by almost 3% in the fourth quarter, demonstrating that they are aware that the market has shifted.

The market appears to be moving more toward buyers. As such, I have moved the needle closer to the center, but I cannot say definitively that the market completely favors buyers. The spring market will be very telling.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Central and Southern Oregon Home Prices

❱ The average home sale price in the region rose 4.8% year over year to $608,654. Prices were up .9% compared to the second quarter of 2022.

❱ Compared to the second quarter of 2022, average prices rose in all counties other than Jackson, where prices dropped 1%.

❱ Four out of the six counties contained in this report saw sale prices rise year over year. The two counties where prices dropped only experienced a modest decline.

❱ Home prices don’t appear to have been significantly impacted by rising mortgage rates yet. Median list prices in the area rose in all counties other than Crook and Josephine, suggesting that home sellers are generally still confident.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The labor market in Central and Southern Oregon continues to improve, but the housing market is starting to experience a period of uncertainty. I mentioned in the second quarter Gardner Report that buyers and sellers may believe the market is underperforming, but this isn’t actually the case. What we are seeing is a pullback from the overstimulated market of 2020 and 2021. The primary reason for this reversion is that mortgage rates have jumped from the all-time lows that were seen during that period.

Homeowners may feel frustrated by this slowing of activity and may also be worried that prices will decline. Though some markets may experience a very modest drop in sale prices, homeowners have seen their property values leap since the pandemic started, and an average of 56% of owners with a mortgage in Central and Southern Oregon are sitting on at least 50% equity. The region will continue to shift back toward equilibrium. As such, I moved the needle closer to signifying a more balanced market than we have seen in over a decade.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Central and Southern Oregon Home Prices

❱ While home sales fell, prices did not. The average sale price in the region rose 10.8% year over year to $603,271. Prices were up 1.5% compared to the first quarter of 2022.

❱ Compared to the first quarter of the year, average prices rose in all counties other than Josephine. In Bend, prices were up more than 13%.

❱ All counties contained in this report except Crook saw average prices rise compared to a year ago. The Bend area experienced significant increases.

❱ Home prices have not been significantly influenced by the increase in mortgage rates yet. Median list prices in the area rose in all counties other than Josephine (where they were flat), which suggests that home sellers are still confident. I will be closely monitoring list prices going forward, as they will be the first indicator that the market is cooling.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The speed of the surge in rates is due to the market having quickly priced in the seven-to-eight rate increase that the Fed is expected to implement this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Though the job market is recovering more slowly than I would like, the housing market is still performing strongly. As we move through the year, some may believe that the market is underperforming, but this is not the case. Along with much of the rest of the country, the Central and Southern Oregon housing market has been overperforming since the pandemic started. As the market starts to trend back to its pre-pandemic pace of sales and price growth, the slowdown might feel exaggerated but there is no cause for concern.

Despite dramatically rising financing costs, buyers still appear to be motivated. List prices have yet to “roll over,” suggesting that sellers are still confident. This, combined with the other data presented here, tells me that they are still in the driver’s seat.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.