Happy New Year! It’s a time to clear out the old, bring in the new, and also predict what’s in store for the coming year.
As we enter into 2020, real estate forecasts have already been popping up left and right. Of course, the forecasts you find in most media outlets are talking about the U.S. real estate market as a whole. The question needs to be asked: how much can national trends actually tell us about local markets, Bend’s included?
Part of the puzzle is assessing how much the factors that affect the national real estate market apply in Bend. Another part of the puzzle is diving into the numbers and finding out what story they tell about the shape of Bend’s market. We’re going to cover both of those bases here.
If you’re thinking about buying or selling a home in Bend in 2020 or perhaps further down the road, you won’t want to rely upon the hearsay or vague predictions that are par for the course. While none of the members of our team actually have the ability to predict the future (we’re working on that), what we can promise you here is the most thorough look possible into the factors that will drive Bend’s real estate market in 2020.
So, without further ado, let’s get to it. Here’s our 2020 real estate forecast for Bend, Oregon. We’ll start with the bigger, national picture then zoom inward from there.
(If you’ve read our 2020 forecast for Eugene, Oregon, you already know our thoughts on the national market, so feel free to skip to the juicy bits on Bend’s real estate market.)
(Not-so) Simple Economics: What’s in Store for the U.S. Housing Market in 2020?
We’re going to get the hardest part out of the way first: what’s going to happen to the U.S. economy in 2020? The simple and honest answer is that we don’t know.
Now, before you click the back button in exasperation, hear us out. No one can say for sure whether the U.S. economy will stay its course or start to falter amid concerns of trade skirmishes, conflict with Iran, and political uncertainty around the 2020 election. For the record, the odds of a 2020 recession are supposed to be 29%, but that picture will shift one way or another as we enter the new year.
Let’s say that signs of a recession do become more definite. Leverage will start to shift, in increments, toward the buyer’s side. Sellers will be more eager to sell, and buyers won’t be as willing to enter the market, resulting in less competition. Barring global catastrophe, things are extremely unlikely to play out the way they did in 2008, when the market went down and stayed down.
But some economists see a cooling market regardless of whether or not the United States enters a recession. Home prices in many areas have heated up beyond what buyers can handle, and inventory levels could reach an all-time low, particularly at the price points accessible to first time home buyers. Interest rates, which are expected to remain favorable to borrowers heading into 2020, have little impact on the picture.
Realtor.com’s 2020 forecast lays out the numbers: home prices are expected to not only flatten out but drop in a quarter of the nation’s 100 largest markets. That includes the San Francisco Bay Area (-0.4%). Meanwhile, other markets on the West Coast are expected to appreciate only modestly, like Portland, Oregon (0.5%) and Los Angeles (0.7%).
Bend/Redmond falls outside of the top 100, so numbers weren’t available as of publication. Of course, we have our own estimates, which we’ll share later on.
On average across the nation’s largest 100 markets, prices are predicted to increase just 0.8%, with home sales dropping 1.8% across the board. The markets expected to appreciate the most are mostly medium-sized cities whose relative affordability and abundance of jobs make them attractive for people fleeing more expensive markets.
The Oregon Office of Economic Analysis expects the number of people moving to Oregon to decline slightly between 2020 and 2025. That isn’t particularly surprising: Oregon as a whole is one of the most expensive places to live in the country.
While its economy is robust and unemployment is low, job growth is likewise expected to slow to about 2%. Nonetheless, as we’ll go into later, Oregon remains an attractive destination for reasons that aren’t strictly economic.
With all of that out of the way, what should we expect for Bend’s market in 2020? Let’s start by diving into the market data for 2019.
What do the Numbers Say about Bend’s Real Estate Market Entering 2020?
There’s no substitute for good, hard data, and courtesy of the Central Oregon Association of Realtors, we have plenty of that for you.
From the beginning of 2019 through the end of the year (with preliminary data available for December 2019), the median sale price for detached single-family homes in Bend was $468,100, with a total of 2,827 sales. During that same period in 2018, the median was $437,400, with a total of 2,943 sales.
That represents a market appreciation of 7% with a 0.4% decrease in total sales volume. As we’ve pointed out in our quarterly market reports, 2019 started off slow, but Bend’s market bounced back in the second quarter and hit the ground running in the third quarter. August broke records with a median sale price of $490,000 for detached single-family homes. Somewhat surprisingly, October wasn’t too far off, with a median sale price of $480,000.
The fourth quarter has seen the winter slowdown typical for Bend’s market, with a median sale price of $460,000 on 710 sales. In 2018, though, there were 660 sales, selling for a median of $437,000.
The low 4th-quarter sales volume in 2018 presaged the low sales that we saw through the first quarter of 2019. It’s therefore notable that 2019 ended with a 7.6% increase in sales from the last year, indicating more buyer confidence heading into 2020.
However, 476 homes were listed in the 4th quarter of both 2018 and 2019. With buyer demand slated to increase through the beginning of 2020, that will likely mean somewhat lower inventory and higher prices. But before we jump to any conclusions, let’s dig deeper into the numbers.
Inventory of detached single-family homes in Bend currently sits at 2 months, lower than we’ve seen at any point in the past several years. To compare, the inventory at the end of 2018 was 3 months.
That’s mainly a result of sales going up in December 2019, while listings went down. Many people chose to avoid listing their homes during the busy holiday season, so we can expect inventory to increase in the New Year.
For that reason, Bend’s current 2 month inventory may prove to be a statistical blip. But the average inventory did fall from 2.9 months through 2018 to 2.8 months through 2019. That’s in spite of relatively high inventory to start the year.
What Bend’s Market Looked Like at Different Price Points in 2019
So where in Bend’s market do we see diminishing inventory? The lower end of the market seems like the obvious first place to look: homes under $350,000 are becoming more and more scarce simply because homes that once sold in that range are now inching toward the high $300k and low $400k range.
Through 2019, 495 homes were listed in sub-$350k range, while 470 sold. That’s a remarkable 32% drop in listings and 42% drop in sales compared to 2018.
Here, we see that inventory at this price point is actually increasing relative to buyer activity. Would-be entry level buyers in Bend’s market are increasingly being driven to more affordable areas. Alternatively, they’re choosing to rent instead of buy. Meanwhile, the sub-$350k listings that are available are less desirable than they were in the past and are sitting on the market longer.
The picture is similar though less pronounced in the $350-450k range. 903 of these homes were listed in 2019, and 834 of them sold. That’s a 5% drop in listings and an 8.5% drop in sales compared to 2018.
We finally start to see higher sales and less inventory in the $450-600k range, which is fast-becoming the mainstream of Bend’s real estate market. 780 of these homes were listed in 2019, right on par with 2018’s total of 792. But sales increased 14.5% in 2019, from 620 in 2018 up to 710.
The $600-800k range saw more activity in general with a 12% increase in listings and 9% increase in sales between 2018 and 2019. Meanwhile, listings in the $800k-1m range were nearly identical between 2018 and 2019 but sales dropped 11% in 2019.
The $1 million-plus range actually saw the greatest increase in market activity in 2019. 203 of these homes sold in 2019, a 26% increase from 2018, while listings increased 11%.
With the picture so different at different price points, it’s going to take some unraveling to get to the bottom line for Bend’s real estate market in 2020. We’re up to the task, however. Read on as we deliver our verdict.
Our Forecast for Bend’s Real Estate Market in 2020
There are a handful of factors that we foresee driving Bend’s market in 2020.
First of all, following 2019’s solid finish, we expect a decent amount of homes to hit the market in the first portion of 2020. Sellers will be confident that they can still fetch premium prices for their homes, but the economic alarm bells that might cause a flood of owners to put their homes on the market are unlikely in 2020.
However, we do expect that economic worries will start to affect the margins of Bend’s market. In particular, more first-time home buyers will hesitate to pay the premium required to enter Bend’s market, continuing a trend that we saw throughout 2019.
Meanwhile though, activity could continue to build in the middle of the market. For those living in the more expensive markets on the West Coast that are expected to cool off in 2020, $450-600k or $600-800k can buy a home in Bend that checks off all of the important boxes.
Many Bend homeowners have already stretched in order to afford starter homes, and the pool of people able to trade up is relatively small. Because of that, homes at the so-called “trade-up” price point and homes at the lower end of the premium market are really the domain of people moving in from out of area.
Prospective home buyers at this price point are often retired or work in fields where they have the opportunity to choose where they live–and Bend is near the top of many people’s lists. We hardly need to mention why. California’s tech industry is a case in point. In spite of its robust economy, people are moving out of California for a variety of reasons, and they’re taking their jobs with them to areas like Bend.
Of course, Bend’s home builders have caught onto this trend. In 2019, 856 new constructions in the $450-800k range hit Bend’s market, compared to 696 the previous year. That represents a whopping 62% of the new inventory at these price points.
It’s valid to ask whether there are too many homes being built at these price points. If the national economy does take a turn and people hesitate to buy in Bend, a glut of inventory could drive down prices. A certain portion of these properties are vacation homes or second residences, and people are less likely to make that investment during a recession.
The effect will be incremental, however. We wouldn’t expect to see the results until 2021 and beyond, by which point builders will have had the opportunity to put the brakes somewhat on new construction. Of course, that’s if the economy experiences a downturn, which is hardly a foregone conclusion at this point.
In 2019, Bend’s luxury market saw significantly more activity than it did a year earlier. A greater proportion of these homes are vacation properties or second residences than at any other price point, so in some sense the luxury market is more vulnerable to a recession.
There is a difference, however, between an economic downturn and the full-on market collapse that happened in 2008. In the case of the latter, owners of luxury properties had no choice but to try and sell. In the case of a recession, owners can choose instead to wait things out, particularly if they’ve made a cash investment.
That means that even if a recession hits, there won’t necessarily be a glut of inventory hitting the market in the luxury range. There will be less buyer activity, however, regardless of whether a recession materializes or not. Would-be sellers at this price point–or any other, for that matter–will need to maximize their leverage in order to stand above the competition.
Vacant properties will have a significant advantage over the competition, and professional staging and photographs are obviously a must. The properties which go off the market the fastest in 2020 will be the properties that are most unique, especially in terms of their location.
It could be harder to sell homes in the hills-unless the views are spectacular–than it will be in the neighborhoods with the greatest degree of walkability and access to all the unique features of the Bend life.
Nonetheless, we aren’t predicting any drastic shifts in Bend’s market in 2020. Our verdict is that the overall sales volume will decrease slightly from 2019–in the area of 1-2%–while the market will appreciate at 4 to 5% in terms of median sale price. You heard it here first!
That’s less than 2019’s 7% appreciation, but it’s still well above that expected on average across the country. To reiterate, Bend is unique enough and desirable enough that we expect buyer activity from out of area to largely outweigh whatever hesitation will emerge due to economic conditions.
In the end, however, the question of whether to enter the market or not is a complicated one, and it depends upon factors that are completely unique to you. We’ll keep you updated on the state of Bend’s market as the new year progresses.
In the meanwhile, feel free to contact our Bend office and we’ll provide you with the very best kind of advice, which is advice completely personalized to you.