In this section you will find the most current trends and statistics for the Bend and Central Oregon real estate market in 2008.

My goal will be to update this section each month. In the meantime, please contact me with how these trends would affect your decision about buying or selling real estate in Bend.

6Stats & Facts
6Analysis & Crystal Ball
6Sales Price Tables
6Sold On Lots Graph - Monthly
6Active Listings Table

In my discussion of the Bend Oregon real estate market since June of 2006, I have suggested that the market would likely continue to adjust and transition into a more "normal" market from the preceding "seller's market". As of the end of July 2008 the sluggish market is continuing to shake out, continues as a "buyer's market", consumer confidence is low, and the market is still far from "normal". At this point it is impossible to say just how long this "normalization" will take.

• Downward trending sales prices of homes on lots stabilized somewhat in May, trended up in June and back down in July. The average sales price YTD for homes on lots in Bend decreased from $377,132 last month to $373,812 in July. This was 11% lower than July 2007, and 12% less than the end of 2007. The YTD median sales price of $300,000 in May also increased to $307,000 in June, but dipped to $305,000 in July. The median is now 12% less than the first of the year and in June 2007.  (Table)
  
  
• Demand, as measured by sales, improved in March, remained somewhat stable in April, increased by 16% in May and another 7% in June. However the number sold dropped 8% from 114 in June to 105 in July. (Note that total sales for the month are almost always under reported, as not all sales are submitted to the MLS by the time I write this monthly report.) Total sales for homes on lots through July 2008 are 34% lower than the first seven months of 2007.  (Chart Table)
  
  
• After demand had dropped and the market started shifting to a "buyer's market" in the Spring and early Summer of 2006, supply or inventory levels started climbing and have remained relatively high since. Inventory peaked in 2007 in August and dropped each month through December. Since the first of the year the supply has increased each month as expected and increased 4%, from 1,570 homes on lots in June to 1,639 as of the end of July.  (Table) This number exceeded the high of 1,624 listings in August of 2007, and the 1,639 active listings of homes on lots now represents 16.8 months of inventory as compared to 16.0 months in June, and 15 months in May, based on the sales rate for the last 12 months (~97.5/mo.). The downward pressure on prices from supply exceeding demand had been reflected by the median list price of homes on lots dropping from $374,700 in May to $363,700 in June, but ticked up in July to $365,000. However this is still 7% less than the first of the year, and 8.5% less than July 2007. The average list price dropped a bit from $504,899 in June to $503,142 in July, which is down 3% since the first of the year and 2% since July 2007.
  
  
• Rural homes in Bend Oregon, on an acre or more, continue to be less affordable, and in less demand than homes on lots. Just 63 homes on acreage have sold thus far in 2008, which is 19% less than through June of 2007. With so few sales, trending is less statistically meaningful, but the YTD average sales price after increasing in June, decreased from $585,014 in June to $565,431 in July, and is down 19% YOY and 22% YTD. The YTD median sale price showed the same trending and decreased from $505,000 in June to $489,000 in July, and this is down 19% YOY and 18% YTD.  (Table) The number of active listings spiked 21% from April to May, increased 2% in June and another 5% in July to 370 listings. This now represents 37.3 months of inventory based on the sales rate for the last 12 months (9.92/month), as compared to 34.7 months as of June (10.2/month). With only 8 active listings for less than $300,000 as compared to 593 homes on lots, many buyers will likely continue to forgo their desire for "elbow room" and acreage to buy more house for the money in town.
  
  
• The City of Bend published an updated proposed Urban Growth Boundary and UAR expansion plan in June of 2007. Most of the expansion was NE of the City giving priority to the City's Juniper Ridge project, which has drawn increasing criticism and a call to stop the project. School boundary issues with Redmond, transportation issues with ODOT, lack of community support for the Juniper Ridge concept, other issues and appeals will likely continue to delay the expansion for some time. More organized opposition to the project, such as Do Juniper Ridge Right has resulted in the City at least revisiting the issues, and reconsidering the current plans for expanding the UGB. Based on this strong opposition, it was recently announced that the City had severed the admittedly ill-conceived agreement with the original developers, but had to pay them around 2.5 million to get out of the agreement. The City also announced they hoped to have a revised UGB plan finished by June 2008, but instead has posted three alternatives this past month, with the goal now being August or September for the final recommendations. Notably absent from the three maps is much of the Juniper Ridge project acreage that was included in the original proposal. It is still likely to be several years before any new land will be annexed into the City. What is ultimately decided will have a major impact on the future of the overall market.
  
  
• In response to the national subprime mortgage problems, The Hope Now Alliance, a partnership between mortgage companies and nonprofit housing counselors, began a nationwide mail campaign in November to offer help to home owners who are having trouble meeting their mortgage payments. Changes have already been made in FHA lending guidelines to assist borrowers in trouble, and there is a movement afloat among some of the largest lenders to freeze the rate for 5 years on some of the "teaser rate" loans that are about to reset. Both FHA and conventional loan limits were increased for Deschutes County to $447,500 in March which should make financing a bit easier. If a borrower is having problems there are an increasing number of options available.
  
  
• The Housing and Economic Recovery Act of 2008 was passed by Congress and signed into law in July. This stimulus package includes changes in FHA financing including a refinance program for homebuyers with problem subprime loans, higher conventional loan limits, plus a $7,500 first-time homebuyer tax credit and more.
  

The July 2008 real estate statistics for Bend indicated a continuing overall sluggish market and at least a temporary reversal of the improving trends observed in June.

Both the average and median sales prices trended up in June, but went down in July. The number of sales increased in June, indicating increasing demand, but dropped off slightly in July. Median list prices did not continue to come down July, even as the supply of listings increased. Last month when overall the market showed positive trending, I speculated whether that was because the market was getting better, or whether it was just a seasonal improvement. Now the question is whether we will see continued negative trending instead of market improvement in Bend.

One of the keys to the market becoming more "normal" is the excess inventory must be absorbed to bring supply back into balance with demand. That has not been happening as fast as hoped. 2007 ended with the number of homes on lots on the market at 12% higher than 2006, or an increase from 6.4 months of inventory to 9.8 months. Since the first of the year, sales have dropped, and inventory has gone up, and July statistics indicate there are now 16.8 months of inventory based on the sale rate for the last 12 months as compared 11.5 months in July 2007.

Some of the new first time homebuyer incentives and programs will help motivate buyers to come back to the market. However, with gas, energy and grocery prices spiking, and the national economy so shaky, many buyers will stay on the sidelines until things improve or stabilize and their confidence is restored.

Will prices go down more? As long as supply so greatly exceeds demand there will continue to be downward pressure on prices. However, some sellers cannot reduce their prices any lower as they are already priced at what they paid or what they owe, which partially explains why average and median list prices have not dropped more. But this has contributed to an increase in local short sales and bank foreclosures which is reflected in the higher inventory number this month. The average seller that *has to* sell will generally lower their list price to their breakeven price. If they can't sell at that breakeven price, then they can try to negotiate a short sale with their lender or failing that, allow the lender to foreclose. Meanwhile the seller that does not have to sell, will often hold their price. This is also true of the seller who has a relatively rare type of property, where there are few comparables. Prices of some properties and some neighborhoods will go down some more, but even in a downward price trending market such as Bend has been experiencing, there will be properties, and perhaps neighborhoods that will not decrease in price.

So the answer to the question about waiting until prices bottom out is, it depends on the property and the circumstances and goals of the buyer. Some "best value" properties may not go down in price, and if you want to buy those properties, you may find today's prices as low as they will be. And even if they do go down a bit more, you might not come out ahead by waiting.

Rising interest rates could negate any advantage of waiting. If interest rates go up 1%, while the median sales price goes down 10%, then the price paid would be the same whether you waited or bought today at the lower interest rate.

Until the excess supply is purged, the Bend market will not normalize, and the July statistics seem to indicate that it will be some time before that happens.

Inventory levels have tended to peak in August, so inventory is likely to continue to creep up. At the same time many sellers will be increasingly motivated to sell before Winter and will likely drop their prices...if they can. Many sellers have already cut their list price as low as they can without bringing cash to the closing table, or negotiating a short sale, so you may not see a big drop in overall list prices. Pricing of the few new listings will generally be realistic and competitive. Builders will continue to cut back in production and in price-point of the few newly started projects. However, few new spec homes will be built, and builders will continue to offer buyer incentives and price reductions on existing inventory. With Winter approaching some builders are offering blow-out prices at below cost. All these changes will help in tempting more buyers back into the market.

As we entered the Summer selling season, I guessed that we would see increased sales, and that the rates might even exceed 2007 levels as the excess supply was purged, but the July stats don't seem to support that. Never the less, as we approach the end of the Summer selling season and sellers become even more motivated to sell before Winter, some buyers will decide that prices have come down enough. The higher conventional and FHA loan limits, the new Housing and Economic Recovery Act , and still relatively low interest rates will motivate some to buy now rather than risk higher interest rates and fewer homes to pick from. Some will take advantage of their negotiation leverage now while they have it, and some will continue to wait and hope for lower prices. However there is a build-up of buyers that will eventually move back into the market, and when that happens the market could adjust more quickly.

What is not clear is when the market will bottom out, or what the ripple effects from the national economy and trends will be on the Bend market. Though the Bend market has shown some resistance to national trends in the past, clearly consumer confidence has been affected locally as has in-migration. However, I do think it is safe to say that the Bend market is poised to rebound more quickly than most places in the Country, and has a better long term future.

Should you buy or sell? In this dynamic and complicated market, it is hard to make general recommendations. I would suggest that in every crisis there is both danger and opportunities. Therefore my advice again this month...it all depends on your particular situation.

"Sellers are facing a price war and a beauty contest, and they need to win both" to sell in this market. Unless you need to sell in this highly competitive "buyer's market", then you might want to wait it out. If you need to sell then you will need to price and position the property very aggressively from the start. While the market adjusts, those properties that have the best location, the best "curb appeal", the best condition, and the best value for the price range and neighborhood are the ones that are most likely to sell. Good planning, marketing and positioning will be critical. In some cases there will be only two solutions for sellers - time or price.

Should you buy? It is likely that buyers will never have a better selection and perhaps find more motivated sellers over the next few months. While supply exceeds demand, there will be downward pressure on prices, but after the excess supply is absorbed prices will go up again. How long that will take is impossible to say, but the Bend market has consistently resisted and out performed national trends and the long term potential for growth and price appreciation is hard to match. In some cases property prices have already bottomed out and become "bargains". Instead of guessing when prices might bottom out, and risk losing the "perfect" home, higher interest rates and the loss of negotiation leverage, it could be a good time to buy, especially if you are thinking longer term and plan on living in a home from 3 to 5 years or more. If price is your most important criteria, and you are willing to compromise on location, condition, features etc, then waiting for even lower prices may be your best strategy. You might also consider trying to buy one of the short sale properties or bank repossessions, but there are other risks associated with these. Once again, it all depends on your particular situation, but if you do plan on eventually buying, you should be getting your ducks lined up and ready to act. Among other things, this means getting pre-approved for your financing, and keeping yourself educated about the market so when the right house comes along at the right price, you will be ready to act.

Should you buy or sell? As I have said before, be careful about believing everything you read or hear. National trends do not necessarily apply to Bend, to a particular neighborhood or property. Real estate is local. You need to do your homework and plan well. With so many variables in play in today's real estate market, the need to educate yourself has never been higher. There is both danger and opportunity in today's market, and a good, long time realtor that has experienced both up and down markets before will be invaluable in helping you make good decisions.

Come back next month to see what happens in this dynamic market. In the meantime, please contact me if you have questions, comments, feedback or want to discuss your particular circumstances in more detail, and whether you should buy or sell...it all depends.