For anyone tracking the real estate craziness in Central Oregon, this report is a great resource. I particularly like it because it looks at all of the major residential markets that make up Central Oregon. So many times, we just look at Bend as a proxy for how the rest of the area is moving, but that reasoning isn’t always accurate.
We’ve been getting a lot of questions regarding the impact that the COVID-19 virus and the stay-at-home order are having on the Bend Oregon real estate market. We made a quick video to update you on what we’re seeing int he Bend residential market by March 25th. We’ll continue to update these pages with statistics we’re pulling together to guide our clients through this difficult time.
Let us know how you like the update, and whether you would like to see more videos, graphs, tables, etc. Want copies of the graphs used in this video? Send us an email.
March 22, 2020 – Life is quickly evolving to deal with the impending COVID-19 pandemic. We expect all of this to have serious effects on the local real estate market, but most of the publicly available statistics are too lagging to give us real insight into what’s going on right this moment.
In an effort to report to our clients and customers in real-time, we’ve starting pulling the raw data out of MLS, importing it into our own databases, and displaying the trends we can see. We expect we’ll continue these types of report until the end of the crisis. Our role is to educate and inform our clients so that they can make the best decision in an ever-changing market. During the financial crisis that started in 2008, we were a leader in problem solving, and a resource for the latest information. Today we return to that role with another decade of experience to share.
The first thing we were interested in looking at was the number of closings and whether perhaps buyers were canceling their escrows. As you’ve heard us say before, buyers can back out, sellers not so much. Buyers may have to leave their earnest money behind, but if there is a market panic, we’ve certainly seen that done without hesitation. Sellers usually don’t have contingencies that allow them to back out of the deal, so it’s much more difficult for a seller to change their mind.
As you can see from the above graph, it doesn’t appear that there is a recent downward trend in closings.
We then looked at the average sales price of recent closings to see if there is any trend regarding the types of properties that are selling. As you can see from the above graph, there is no real trend that we could tell except that there seems to less variety in the kind of properties that are closing.
This is the graph that we feel tells the most important story right now. This is a look at new residential contracts for purchase. As you can tell, there is a steep decline in new contracts which will show up in the closing numbers soon. We’ll continue to watch and report on this trend as the data becomes available.
The Bend and Central Oregon real estate markets surged again in the the last year. Across all genres of the market we saw lower days-on-market, higher price per square foot, and lower inventories for sale when compared to recent years. As real estate brokers, we spent a lot of time explaining to new buyers that those fantastic deals they hear their friends talk about, have largely become a relic of the past…for now.
Buyers have responded to the financial pressures to make their Central Oregon relocation now. Historically low-interest rates, we’ve all been told, will soon start slipping away. That escalation in monthly interest payment combined with the constant rise in Central Oregon real estate prices, put a time limit on most buyers.
Bend led the charge with higher buyer demand than we’ve seen in many years. Neighborhoods like Tetherow and Northwest Crossing have only picked up momentum and builders are struggling to keep up with the buyer demand for new houses.
New home demand has put pressure on land prices as Bend starts to struggle against its own Urban Growth Boundary. Custom home builders have benefited from buyers picking up “in-fill” lots and building new homes in established neighborhoods.
Buyers continues to assign a large premium to locations west of the Deschutes River, and developers wanting to capture that premium are pushing for more westside development. Watch neighborhoods like The Tree Farm (outside of the City Limits), Discovery Park, the unpublished Northwest Crossing Phase II, and the new Three Pines Ridge (located between Three Pines and Shevlin Ridge).
The new Oregon State University campus, currently under construction, won’t do anything to slow this push of the city’s physical and financial epicenters to the west. For all of the complaints that have been lodged against its construction, the new four-year university will be a popular amenity for area developers to take advantage of.
In a pattern reminiscent of the last boom cycle in Central Oregon, the strong demand and higher prices started in Bend, and now radiate out to surrounding communities in a slow tsunami. The patterns of lower inventory, higher prices, and shorter market times are moving through Redmond, La Pine, Sisters, and Prineville.
Some buyers think that the best strategy right now is to wait. The assumption is that a major price correction like what we saw in 2008 is just around the corner, and will be a better time to pick up a property. But we don’t think history is on their side. For sure there is always a downturn in the market looming in the future, but to what extent that downturn drives down prices is very material. We have to remember that the collapse we saw in 2008 was an anomaly. Experts had to look back 80 years to find parallels in the Great Depression. And in the meantime, the costs of waiting, in form of mortgage interest rates and rental prices, continue to put pressure on the decision.
*The one exception the rising markets seems to be Sunriver. We may have to study this further, but Sunriver’s market charts largely seem flat. A confused seasonal surge every year, but not a real upward movement that you can readily discern.
Additional Dwelling Units (ADUs), or “granny flats”, could be part of the solution for Bend, Oregon’s housing affordability. They’ve become a popular investment for many homeowners in the area, but the City Council may be taking steps to make them even more so.
The current ADU rules allow you to build an additional residence on your property up to 600 sf (some restrictions apply). You’ll need to provide an additional parking space for your new dwelling, and if your lot was created prior to 1998, you’ll need to go through a public conditional-use permitting process. This costs homeowners a minimum of $2,600, plus the time and effort of the application and required public meeting.
What the City of Bend is considering is removing many of these requirements. Specifically:
– No conditional use permit required in most residential areas.
– Increasing the maximum size of an ADU to 800 sf.
– Removing the requirement for additional parking.
Prior to the City of Bend imposing restrictions on vacation rentals, ADUs were a popular option for homeowners looking to earn some additional income by taking in travelers. The new ordinances severely limit most homeowners ability to enjoy the revenue they once could from the tourist market, which was, in most cases, many times what they could earn renting property out on long-term leases.
However, with the ever-increasing trends of aging in place and multi-generational households, the ADU continues to be a popular addition.
From the City’s standpoint, Additional Dwelling Units provide much needed rental inventories, increased density, and utilizes already existing infrastructure while making room for new growth. ADUs also bring affordable housing into neighborhoods which may no longer be affordable to most homebuyers. This is in contrast to the affordable-housing solutions from most developers that cluster entry-level housing on the periphery of the City where land is cheapest.
Bend isn’t the only city in Bend that thinks ADUs might offer many solutions. The City of Portland was an early adopter of new relaxed standards on ADUs when it came to their land-use process. Like Bend, Portland was suffering from the same dramatic increases in home prices that Oregon’s land-use laws can create in a rapidly growing city. Empowering homeowners to easily add new residences into their own neighborhoods was seen as a smart move.
Adding a rental property to your current residence can come with some tax advantages (please consult your tax professional), but many people forget that it will also likely increase their property taxes. Because Oregon has limited property tax increases under normal circumstances (Measure 50), adding an additional residence to your property can have somewhat surprising tax results. In the Bend area, we recommend talking to the folks at Deschutes County Tax Assessors Office prior to finalizing any plans for an ADU. The staff there is helpful in explaining most property tax concerns, and their advice may direct the type of ADU you ultimately decide on.