Other readings of the market are not as rosy
After a volatile winter, the Bend housing market seems on track for another summer with plenty of sales and record-high prices.
That’s according to one measure that is closely followed by Bend real estate brokers and homeowners. The Beacon Report by Beacon Appraisal Group in Redmond shows the median sales price of single-family homes in the Bend area reached a new high in May of $466,000, up 12.3% from May 2018. Sales volume was higher as well with 232 transactions, up 4% from the previous year.
Yet other real estate market measures are not as rosy. The S&P CoreLogic Case-Shiller Indices show price growth in large metro areas slowing to low single digits. Because so many buyers come from Portland, Seattle and the San Francisco Bay area, any decline in their purchasing power could hurt the Bend market, said Donnie Montagner, owner of Beacon Appraisal group and author of the Beacon Report.
The Bend-Redmond metro area, which covers Deschutes County, is too small to be covered by the nationally recognized Case-Shiller, but Zillow tracks home values down to the zip code. Zillow says Bend-Redmond, which includes all of Deschutes County, is “cool.” The median value for Bend-Redmond through April 30 was $399,600. The growth rate has slowed from 12% to 9% over the past year, and from March to April it was 0.1%, said Sarah Mikhitarian, senior economist at Zillow in Seattle.
“If we look at how home values are changing month-over-month, it does seem to be slowing down,” Mikhitarian said. “We do see something similar happening in Portland, but on a more exaggerated scale.”
The market in Bend alone is “warm,” according to Zillow. The median value was $440,400 and forecast to grow 3.7% over the next year. Several factors from the local housing market and economy go into Zillow’s assessment, which accounts for the large number of buyers from major metro areas, Mikhitarian said.
The Beacon Report, Case-Shiller, Zillow and the Central Oregon Association of Realtors, which created its own index, use different methodologies, which explains why they vary.
The Beacon Report takes the median sales price, which is the midpoint of all transactions in a month. Because it’s not an average, it’s not skewed by extremely high or low prices.
The median can swing dramatically from month to month, depending on the types of homes being sold, Montagner said. That was obvious in February, when the median sale price in Bend dropped to $427,000 after reaching $450,000 in January. “Month to month doesn’t say anything,” he said.
Case-Shiller tracks the price of a home as it’s sold and resold over time, so month-to-month changes in the index are meaningful. In the last reading, released in May, Portland rose only 0.7% between February and March to 233.19. The month-to-month increase was even smaller after adjusting for seasonality, 0.2%.
Central Oregon isn’t big enough to be included in the Case-Shiller, which is one reason the Central Oregon Association of Realtors contracted with EcoNorthwest to create its own index for the three-county region. The first-quarter reading was 202.6, up from 182.7 in the first quarter 2018. The growth rate over the previous 12 months slowed from 13% to 12%.
Zillow offers the most granular view of Central Oregon, but real estate professionals question its accuracy.
“It’s a great search tool,” said Carey McQuate, a principal broker at Cascade-Sotheby’s International Realty. But she doesn’t find Zillow’s estimates credible. “It’s just an algorithm,” she said.
Zillow pegged the value of a newly built home, which McQuate recently listed for $424,990, at $390,000. “However, this house is next to a park,” she said. And a similar house around the corner sold two weeks prior for $420,000, she added.
The way Zillow creates forecasts for areas that generate too few transactions to show up in the Case-Shiller is to assign values to homes that have not been on the market. Zillow uses other information sources to assign value to attributes of a home.
“We’re able to get a home value … for every home in a given region,” Mikhitarian said. “We account for error by taking the median in an area. As the median we’re fairly accurate for the typical home value.”
The fact that Zillow’s estimates aren’t based on transaction data raises a lot of questions for Montagner. The Zestimate “just becomes fun to look at, I guess.”
Homeowners shouldn’t assume their property will match the overall trend, Montagner said. He had one client who cited the Beacon Report in arguing that his appraisal should have been $20,000 higher. “That concerns me,” he said. “It is a tool to look at to get a broad overview.”
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