What’s happening in the Central Oregon real estate market?
The Central Oregon Association of REALTORS® has released its mid-year market report. Showcasing data and trends for January through June of 2021, the report states:
As we are now well beyond a year into the pandemic and the associated economic recession, the housing market has shown few signs of cooling off. Broadly, the economy is slowly recovering, and as of early July, fully open. Government programs and stimulus are winding down, as is the eviction moratorium and extended unemployment coverage. There is looming uncertainty about new strains of COVID-19, as well as the long-term efficacy of vaccinations, and what that means from a public health perspective as well as for reinstituting social distancing requirements and restrictions on businesses.
Despite the continued high rate of unemployment and uncertainty across a broad range of areas related to the housing markets, a question often being asked is: are we building another housing bubble? If you look at the change in median sale price in the region over the last year, you might come to a misleading conclusion.
The median sales price in the region increased 37% from the second quarter in 2020 to the second quarter in 2021, from $413k to $565k. Does that mean that, on average, houses in the region are now 37% more valuable than a year ago— and that we are forming a new bubble? The answer is no, at least on the appreciation rate in the region, which is more like 11.4% as measured by the price index.
Median prices have been skyrocketing during the pandemic, primarily due to a change in the composition of what is being listed. There was a 50% drop in the number of houses sold below the $400k price point in June 2021 compared to June 2020. At the same time, there was a 123% increase in the number of properties sold over $750k. This change in price points is primarily what caused the median sale price to increase (along with an overall increase in market price of about 11%).
Nationally, we have seen the highest recorded appreciation rates (as measured by the Case/Shiller Index) since at least 2000. These broad-based increases in price have been fueled primarily by an atypical imbalance in the market, where the number of listings decreased while the number of sales increased. This caused the months of supply of homes to hit historical lows at the end of 2020, at less than a month of supply in Central Oregon. In the first six months of 2021, months of supply has increased slightly, to about one month of supply. There are a variety of reasons why the number of listings dropped, some of which are COVID-related, but the best way to describe it is that demand vastly exceed supply.
In early 2021, nearly 80% of homes listed went pending in under 2 weeks. The number of new listings was less than the total sales, so the inventory of homes steadily declined from March of 2020 to January of 2021. We are now seeing a reversal of the trend, with the number of listings increasing. However, the months of supply is still near historic lows; until that moves back above 3 months, prices will continue to rise, but not at the rate we have seen over the past year. An increasing interest rate environment, along with a more typical balance of buyers and sellers, is likely to reduce the rate of price increases, but the market indicators are still strong for a sustained period of growth.
Read the full COAR Mid Year Report here:ECONW_COAR_2021_Q2_Report_Final_Draft
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