With the ball having dropped on the New Year, there’s already no shortage of real estate forecasts for 2020. 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, Eugene’s included?
Part of the puzzle is assessing how much the factors that affect the national real estate market apply in Eugene. Another part of the puzzle is diving into the numbers and finding out what story they tell about the shape of Eugene’s market. We’re going to cover both of those bases here.
If you’re thinking about buying or selling a home in Eugene in 2020 or perhaps further down the road, you won’t want to rely upon the heresay 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 Eugene’s real estate market in 2020.
So, without further ado, let’s get to it. Here’s our 2020 real estate forecast for Eugene, Oregon. We’ll start with the bigger, national picture then zoom inward from there.
(If you’ve read our 2020 forecast for Bend, Oregon, you already know our thoughts on the national market, so feel free to skip to the juicy bits on Eugene’s 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 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%).
Eugene-Springfield 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 Eugene’s market in 2020? Let’s start by diving into the market data for 2019.
What do the Numbers Say about Eugene’s Real Estate Market Entering 2020?
There’s no substitute for good, hard data, and courtesy of the Regional Multiple Listing Service, we have plenty of that for you.
From the beginning of 2019 through the end of the year, the median sale price for detached single-family homes in Eugene was $330,000, with a total of 2,224 sales. In 2018, the median sale price was $318,000, with a total of 2,489 sales.
That represents a market appreciation of 3.8% with a 12% decrease in sales. As we’ve pointed out in our quarterly market reports, 2019 started off slow, but Eugene’s market bounced back in the second quarter and hit the ground running in the third quarter. September broke records with a median sale price of $354,000 for detached single-family homes.
The fourth quarter didn’t hit those heights, which is to be expected in the colder, rainier months, with a median sale price of $339,516. That figure is still robust, giving the sense that Eugene’s market is hardly on a downward trajectory. With 540 homes sold in the fourth of 2019, sales were fairly close to Q4 of 2018’s total of 555.
In other words, the slow start we saw at the beginning of 2019 weighs down our numbers, making Eugene’s market look weaker heading into 2020 than it actually is. And though overall sales numbers have dropped, it isn’t the case that less people want to buy homes in Eugene.
Inventory of Eugene detached single-family homes is remarkably low, averaging just 1.2 months through both 2018 and 2019. Desirable homes in Eugene do find buyers, and quickly at that, with homes sitting on the market for a median of only 13 days across all price points. Less homes sold in Eugene in 2019 than in 2018 simply because less homes hit the market.
That begs the question: why aren’t homes going on the market in Eugene? One obvious reason is that Eugene’s rental market is quite lucrative, thanks in no small part to its large student population.
According to Rentcafe, Eugene rentals are currently appreciating at an annual rate of 4%, well above the national average of 1.4% as of publication. A lack of new construction is another clear factor, with a growing deficit of buildable land.
It’s also worth pointing out that the decrease in listings and sales is almost entirely relegated to the lower end of Eugene’s real estate market. While 1,113 sub-300k homes were listed in Eugene through the first 11 months of 2018, only 857 were listed during that same period in 2019.
In the 300-450k range, however, listings and sales were nearly identical in 2018 and 2019. In fact, from 450k on up, 2019 saw an increase in sales in spite of a (very slight) decrease in listings. That was most marked in the $450-600k range, with 292 sales through the first 11 months of 2019 compared to 266 a year earlier.
Average days spent on the market in 2019 also dropped across almost every price point. That’s as clear of an indication as any of pressure increasing on buyers across Eugene’s market.
So, given all the information available at present, what’s in store for Eugene’s market in 2020? What are the most important takeaways for would-be buyers and sellers? Read on as we deliver our verdict.
The Bottom Line for Eugene’s Real Estate Market in 2020
Let’s start with the obvious: Eugene is becoming a less affordable place to live. The most significant difference between Eugene’s market in 2018 and 2019 has been a lower inventory of starter homes and therefore lower sales. Even if you can afford to buy a home, there just isn’t much available at any price point, let alone in the sub $300k range typically considered the domain of first-time homeowners.
With its rental market just as tight, Eugene is certainly becoming more forbidding for young families and people just embarking on their careers. Eugene’s housing market simply can’t accommodate a much greater influx of new arrivals. Then again, neither can its economy, which is healthy enough but basically at the peak of its upward momentum regardless of whether the U.S. enters a recession.
What the numbers do show is that Eugene has a steady influx of people entering the market in the trade-up and premium ranges. The second most significant shift between 2018 and the end of 2019 was more sales and lower inventory in the $450-600k range.
It’s worth pointing out though that people are moving to Eugene for reasons that aren’t strictly economic. Eugene is an attractive destination for people who have already purchased their first (or second, or third) home and have a relative degree of financial security, including young professionals and retirees.
In short, Eugene’s attractiveness is all about quality of life. If people have the opportunity to choose where they live, Eugene is one of the places in the United States that ends up on their lists. They may be fleeing more expensive markets in California, Seattle, Portland or elsewhere, and the $450k+ range marks an especially attractive entry-point. Climate refugees will also be more of a factor in the future, and Oregonians may as well prepare for that inevitability.
If the U.S. economy does start to falter in 2020, people on the edge of being able to afford a home in Eugene may very well decide to look elsewhere. But there will also be plenty of people exiting the markets mentioned above. Eugene will likely be a more palatable destination for someone exiting the Bay Area than, say, Chattanooga or Winston-Salem, both inductees in “Top Housing Markets of 2020” lists.
Eugene homeowners may decide to cash out their equity and head to other markets rather than face the prospect of declining property values. Of course, with Eugene’s market appreciating at 4% entering 2020, there’s a significant distance to cover before that becomes a reality.
To put it simply, we don’t foresee the pool of buyers narrowing nearly enough to make that happen. We do, however, expect to see the effects of economic anxiety emerge on the margins of Eugene’s market.
First, bidding wars will be rarer in 2020 than they were in 2019. The most appealing properties in terms of finishes, location and curb appeal will still draw multiple offers, but buyers will be more hesitant to offer significantly higher than list price.
On the lower end of Eugene’s market, we expect to see more hesitation from would-be first time home buyers. A certain number of people will opt to stay in their starter homes rather than trade up, so there won’t be more sub $300-k homes coming up for sale. Buyers who do brave the market, however, may be rewarded with less competition. They may also find more realistic list prices on homes which need cosmetic and functional updates.
With less people trading up, the pool of buyers in the middle of Eugene’s market will shrink a bit. However, these homes will continue to remain attractive to out-of-area transplants.
In both the middle and upper ends of Eugene’s market, homes with a combination of good finishes, a desirable location, and solid marketing will continue to sell. Inventory will increase slightly, and less desirable properties will sit on the market longer before selling at well below list price.
With all of that said, these incremental and minor, as Eugene’s market proves its resilience in the face of economic uncertainty. 2020 may start off even slower than 2019 did, but when the sun starts to come out and people see that the sky hasn’t fallen, the market will pick up again more or less where it left off.
The main difference between 2020 and 2019 will be a slight increase in inventory across the middle and upper ends of the market. The final sales tally, however, will be about the same in 2020. Market appreciation will drop slightly–we’re figuring slightly less than 3 percent–but the alarm bells that might send prices plummeting will fail to ring.
In the end, 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, though, on the state of Eugene’s market as the new year progresses.