By Cindy King for the Bulletin Special Projects
Multiple offers on every single listing under $325,000 won’t last forever. Strong sales within the multimillion dollar market will adjust as well. This, too, shall pass—but when?
That’s the leading question of the day that many of my peers within the real estate industry are asked multiple times a week. With data, data, and more data available to anyone and everyone interested in reading about it, what is happening in the Central Oregon market? What does it all mean?
First off, as the real estate market is constantly changing, it’s no surprise to those of us heavily invested (no pun intended) in the industry. To project it playing out as we expect, constant double-digit growth cannot remain constant. Multiple offers on every single listing under $325,000 won’t last forever. Strong sales within the multimillion dollar market will adjust as well. This, too, shall pass—but when?
In my experience, there are three different angles of real estate interest: One, current sellers. Two, current buyers. Three, hobby interest. Actually, there are four—each respective city’s responsibility for planning for this growth. Bend is predicted and expected to have a population of 110,000 by 2025. Personally, I suspect we will reach that by 2020, but I’m not the census bureau. (I live here and see the traffic impacts not just during the summer months but all year round now.) This growth bleeds out to our neighboring cities, which also boosts their demand for housing on all sides. This isn’t necessarily all bad because, believe it or not, not everyone wants to live in Bend. (I know, crazy, right?) But that’s another topic for another day.
Here’s what I see happening.
Market changes are opportunities, first and foremost. Central Oregon, and Bend in particular, are still experiencing a strong market. We still do not have a healthy supply of homes—healthy meaning a six- to seven-month supply. Anything less or anything more than that reflects an unbalanced market. Buyers are still having to pay a premium for Bend-area properties, but it lacks the frenzy we’ve seen in the past few years. Buyers, and sellers actually, can be a little more measured now, which I think is a good thing.
In the big picture, the supply shortage is a much better problem to have compared to a demand shortage. There is a good possibility for solid home sales growth once the supply issue is steadily addressed, which we are right in the middle of with the expansion of our urban growth boundary.
The word “bubble” is reentering the minds of many consumers, so let’s unpack why today’s conditions are radically different compared to what we had 10 years ago. Back then, lending standards were nonexistent and anyone who fogged up a mirror could get a loan. In contrast, the lending standards today are still stringent, as evidenced by the higher than normal credit scores of those who are able to obtain a mortgage. That is why mortgage default and foreclosure rates are at historic lows. On the supply side, there was overbuilding during the bubble years, with 2.1 million housing starts. Today, we are just scratching 1.3 million. This projection of 1.3 million units is insufficient, and in my opinion unrealistic. Inventory levels have fallen over the past three years within the last eight to 10 year cycle. But remember, 10 years ago we lacked the construction industry after they fled the area due to the market crash. It takes time to heal a big wound.
With our population growth comes a new type of demand for new types of housing. While single-family homes are the properties most highly in demand, we will experience a desire and demand for smaller homes—micro-units, which I have heard referred to as SEDUs, or small efficiency dwelling units. Look for the Central District and other core areas in Bend to include discussions about repurposing buildings and creating more density with smaller, efficient homes because the demand is starting to build. It will be coming to a downtown near you, so be ready.
Central Oregon will continue to be a strong market, with mild adjustments here and there and equity growth a little slower throughout 2018 and 2019 (single digits instead of double digits). We are on the map and our population will continue to grow. We are a fortunate, vibrant community with much to be thankful for, and I appreciate this opportunity to share my thoughts with you.