What a year it’s been. As we approach the New Year, it’s time (finally!) to put 2020 and its many challenges in the rearview mirror and look at what lies in store for 2021. So, we’ve dusted off the old crystal ball and stared long and hard at it to bring to you this, our 2021 real estate market forecast for Eugene, Oregon. We’ve also crunched plenty of numbers, so don’t press the back button if that sounds a little too woo-woo.
Most likely, you’re here because you’re thinking of entering the Eugene real estate market in the coming year or maybe further down the road. Timing is everything, and no matter what kind of investment we’re talking about, you’ll want to buy low and sell high if you possibly can. So what’s in store for home prices in Eugene next year and beyond?
Predicting the future with any degree of accuracy is usually more about understanding the past than anything else. So we’re going to start by talking about what’s happened in Eugene’s real esate market (and across the country) in 2020. We’ll go into the hard numbers and then extrapolate from there to give you our 2021 forecast for Eugene.
Sound good? Let’s stroll down memory lane, though you may just want to skip ahead if 2020 is a little too fresh and raw to revisit quite yet. Click here to cut to the chase and read our bottom line forecast for Eugene’s real estate market in 2021.
How COVID-19 Impacted Eugene’s Real Estate Market in 2020
The story of 2020 is right there in the heading: we’ve been in the midst of a pandemic pretty much the whole year, even if COVID-19 was still under the radar at first. In January and February, before the virus really emerged as a threat, real estate markets across the country were on pace to perform exceptionally. Nationally, purchase applications were up double digits compared to 2019, and new housing starts were up 40%.
Eugene’s market was looking pretty good itself at the beginning of 2020. In January and February, pending sales were up 9.5% and new listings were up 14% year-over-year. But then March hit, and everything came to a screeching halt. Stay-at-home orders meant people weren’t out looking at homes and sellers weren’t listing non-vacant properties. Small businesses began to go underwater and many people lost their jobs or were furloughed.
On May 15, though, most parts of Oregon began to enter Phase 1 of reopening. With mortgage rates at all-time lows, it didn’t take much to encourage buyers to reenter Eugene’s market and markets across the country. By June and July, pending sales were up double-digits year-over-year, even though new listings were down 20% in the second quarter.
Eugene’s inventory was already tight, and Q2’s deficit of new inventory only made things tighter for would-be Eugene buyers. Rising prices were the predictable result. Residential properties sold for a median of $356,250 during the third quarter of 2020, a 10% year-over-year increase.
By the end of Q3, sellers had already begun to reenter the market, however, and listings actually increased 5% year-over-year. That wasn’t enough to make up for the earlier deficit, but it did provide a bit more fuel for a scorching 4th quarter.
Final numbers for December weren’t available as of publication, but October and November broke all sorts of records. According to statistics from the Regional Multiple Listing Service, the median sale price for homes in Eugene was $380,250 in October of 2020. That’s an all-time high and an increase of 18% from 2019’s high-water mark of $330,000. Meanwhile, both pending sales and new listings were up 15% year-over-year.
Normally, Eugene’s market cools off significantly during the fall months. This year, however, new inventory has continued to enter the market and buyers have continued to snatch it up even as temperatures cool and the sky gets greyer. November did see a drop from October’s highs, though.
All told, 2020’s numbers are actually pretty close to 2019’s, with new sales down 3% year-over-year and new listings dropping just 0.5%. At the same time, 2020’s median sale price of $352,000 represents an 11% year-over-year increase. The previous year, Eugene homes appreciated only 4% on average.
Timing is part of it. Inventory dropped the most heading into what became a busy summer buying season, creating upward pressure that didn’t ease even as more people started selling their homes. Prices also increased rapidly nationwide, appreciating 6% through all of 2020 and 9.4% over the last six months. So Eugene’s market rode a nationwide wave through 2020, but it’s also outpaced the rest of the country in spite of falling behind 2019’s average. Let’s look at why.
Who Bought a Home in Eugene in 2020, and What Did They Buy?
While the numbers above give a broad overview of Eugene’s market in 2020, they don’t tell the whole story. We’re going to go a couple of layers deeper into the numbers and go boldly where few Realtors have gone before, so strap on your seatbelts and hold on to your lattes.
According to the Portland State University population research center, Eugene’s population grew by 14,915 people between 2010 and July of 2019, almost all of that surplus coming from migration into the city. We don’t have specific data on how many of those people came from out of state, but that’s not going to stop us from doing a little math.
Research pins Oregon’s net migration at 311,583 people during that same period. Eugene makes up about 4% of Oregon’s population, suggesting that Eugene’s share of the out-of-state pie is about 12,500 people. That’s a very rough estimate, but the main takeaway is this: the vast majority of Eugene’s new residents over the past 10 years are transplants from out of state.
Migration to Eugene actually ramped up leading into 2020 with a population increase of an estimated 2,410 residents, the second-highest total in the state. So, where are all of these transplants coming from? The answer, not surprisingly, is California. Between 2014 and 2018, Californians accounted for roughly half of Oregon’s net migration. Hawaii, Virginia, and Texas follow behind, but it’s not even a close race.
While the numbers aren’t out yet, we expect that 2020 will emerge as a marquee year for relocation to Oregon. We’ll have more on that below.
Prices are certainly lower on average in Eugene than in most parts of California. At the same time, it’s difficult to do an apples-to-apples comparison between the kind of inventory available in Eugene and elsewhere. We’re therefore not on board with the narrative that transplants are solely responsible for driving up home prices in Eugene. The real culprit is a lack of desirable inventory, period.
For decades, new construction has been very limited in Eugene, currently averaging only one unit per three new residents. While the city’s restrictive urban growth boundary (UGB) has some tangible benefits, it’s also made for one of the most constrained housing markets in the nation. As a result, homes with contemporary architectural features and finishes are hard to come by, even at higher price points.
The price point that actually saw the biggest squeeze in Eugene relative to 2019 is the $500-650k range, where new listings increased a modest 11% but sales jumped a whopping 40%. Our hunch: out-of-state buyers are gravitating toward homes in the upper-middle of Eugene’s market, and they’re paying about as much for them as they would for the properties that they’re leaving. The market for $650-800k homes also got a bit tighter in 2020, with sales outpacing new listings by 7%.
Demand surged for homes at almost all price points in Eugene, but there’s a single exception: the sub-$300k range. New listings fell by 29% in 2020. That isn’t necessarily surprising: with prices rapidly shooting upward, 2019’s sub-$300k home is now a $300k-plus home. Sales dropped even further, though, plunging 36% in 2020, and a higher portion of new listings failed to find a buyer.
While many sectors of the U.S. economy have rebounded since March and April, others are still reeling. In spite of record-low interest rates, financial insecurity may be discouraging first-time buyers in Eugene from entering the market. The economics for first-time buyers and working families were already tricky heading into 2020, and rising prices during the pandemic have only exacerbated the situation.
Many would-be first-time home buyers will choose to rent instead, while others will be drawn to areas with a lower cost of living. It’s possible that we are seeing the beginning of a demographic shift in Eugene, with a lack of affordable homes reaching its tipping point. As we’ve emphasized before, the City of Eugene needs to do more to create affordable housing opportunities, but the damage has already been done.
We’ll venture to guess that a higher portion of sub-$300k homes in Eugene were significant fixer-uppers in 2020 compared to previous years. Move-in ready homes hovering around the $300k range likely received multiple offers, bringing prices up into the next tier.
Ignoring the sub-$300k range, sales on all other residential properties were up 18% in 2020 and new listings were up only 14%. That imbalance was key in driving prices to the record highs we saw in October. Inventory was already so low in Eugene that even a 4% gap between seller and buyer activity led to an outsize amount of pressure on the market.
As of publication, available inventory stands at only 0.6 months. That’s extremely low, though not unusual for this time of year. As of publication, though, 34 of the 113 available properties were condominiums in a new building downtown. Inventory of single-family homes is actually closer to 0.4 months, lower than ever before in Eugene.
Typically, new inventory starts to hit the market in January and February, but buyers don’t turn up in volume until the spring. Will that be the case next year, and if not, what effect will it have on the market?
We promised a real estate forecast for 2021, and that’s what you’re going to get. Read on and we’ll deliver our verdict.
Here are the Factors We See Driving Buyers to Eugene in 2021
Getting away from real estate for just one moment, 2021 is going to be a pivotal year on many levels. In some ways, things may be returning to normal with the rollout of an effective vaccine through the first half of the year. We’re all looking forward to being able to gather and move more freely again. Some are predicting a “new roaring twenties” as we emerge from lockdown. Sounds like fun, doesn’t it?
At the same time, a lot has shifted in 2020, and in many ways, there’s no going back. Some companies that embraced remote work during the pandemic may be calling back the troops in 2021, but in many ways, the remote work revolution is likely here to stay. While the narrative about people fleeing urban centers for suburbs for small cities appears to be overblown, Eugene is still an attractive niche destination for those looking to escape Silicon Valley or other urban environs. That will drive more people here in the years ahead.
People move to Eugene for a variety of reasons, but for those who deliberately choose to relocate here, quality of life is key. Life-altering events like pandemics have a way of shifting our priorities. There has been an opportunity to pause, take stock, and reevaluate.
One thing that has shifted during 2020 is our sense of what home is. Spending more time inside the house with our family members, we may be less inclined to commute long distances, seeking a lifestyle that’s more connected to the home and hearth. We might also have found ourselves spending more time outdoors, gardening, or just working on a computer under the shade of a tree.
Climate change may be on our minds as we seek to move from environs that are becoming hotter, dryer, and less livable. Interestingly, Seattle was the biggest destination for people leaving the Bay Area in 2020, with the climate being the most obvious difference between the two urban areas.
Maybe spending more time at home has given us a keener sense of how our current living arrangement does or doesn’t work. With the kids at home all the time, things may be feeling a bit cramped, or maybe you just need space for a home office. Perhaps you’ve developed new hobbies during the pandemic and need space for a home gym, a workshop-slash-craft space, or a place to store all of your new outdoor toys.
While low interest rates spurred some of the buyer activity we saw in the summer and fall of 2020, higher prices meant that most buyers weren’t actually getting a better deal. Mortgage rates are projected to increase somewhat in 2021, and FOMO may have played a factor, with buyers rushing to get in before both rates and prices go up.
Nonetheless, we think 2020’s real estate boom was driven by something more fundamental, which is shifting needs and priorities around our sense of home. We expect that dynamic to only ramp up heading into 2021 and beyond, particularly in markets like Eugene’s which offer tangible lifestyle benefits.
Our 2021 Forecast for Eugene’s Real Estate Market
At the beginning of 2021, COVID-19 will continue to be a large presence, and we will see a noticeable reduction in new inventory compared to the winters of 2020 and 2019. At the same time, there will be more buyers competing for the limited number of homes available for sale. There are a number of folks who entered Eugene’s market in the summer or fall who couldn’t find a home or made offers that weren’t accepted, and they will still be looking.
Higher competition will lead to rising prices, though it is unlikely we will retest October’s highs until the spring. There will be a lot of momentum heading into the warmer months, however. We will start to see more listings, but sellers will be particularly ambitious in setting list prices.
Assuming vaccinations go well, we may see a flood of new inventory in the summer. At the same time, we will also see a flood of new buyers. While many people decided to go ahead with plans to move during the pandemic, many others felt the inspiration but decided to hold off until COVID-19 becomes less of an issue. Eugene has been on their radar, and they will be showing up next spring and summer.
The end of mortgage forbearance has been a looming issue. Regardless of what happens on the political level, we expect banks to hesitate to foreclose on homes for the foreseeable future. In other words, we don’t expect a significant influx of new inventory from mortgage defaults.
Several more of the market trends that we highlighted in 2020 will continue to be big factors in 2021. The upper-middle end of Eugene’s market will continue to get tighter and tighter as transplants from more expensive markets continue to gravitate toward these homes, particularly in desirable neighborhoods like Amazon, College Hill, Southeast Eugene, Fairmount, the Churchill hills, and Cal Young.
Several years ago, bidding wars in Eugene mainly took place on sub-$400k homes, but buyers at significantly higher price points now need to be prepared for stiffer competition. Sellers will benefit, of course, but relatively minor cosmetic improvements and tasteful staging might have an outsize impact in triggering strong buyer interest.
Demand will continue to be lower for homes at the bottom end of Eugene’s market, and sellers of these homes will be wise to obtain professional photographs and take steps to make them show better. Even though inventory is tight in Eugene, sellers of lower-end homes in most locations can no longer count on an automatic sale. Steps need to be taken to appeal to first-time homebuyers who are already skittish about entering the market. We’ll be looking closely at the market for sub-$300k homes in 2020 to see what they tell us about Eugene’s future.
If you’re a buyer looking in the sub-300k or even sub-400k range in Eugene’s more desirable neighborhoods, it will be important not to be put off by issues that are only surface-deep. A big part of our job is helping you distinguish between the diamonds in the rough and the overpriced duds that will only drain your energy and your bank account.
If you’re thinking about listing your home in 2021, it might be worth exploring putting your home on the market in the winter in order to beat the summer rush. On the other hand, prices will almost certainly hit new records again in the warmer months. If COVID-19 is less of an issue at that point, the extra peace of mind could be worth the competition, especially if you’ll still be occupying your home when you put it on the market.
All in all, we’re expecting prices to appreciate another 10% through the end of 2021, with a median sale price through 2021 of about $390,000. We’ll see homes hit a median of $400,000 for the first time in the late spring or early summer, with the potential for Eugene’s market to heat up even further from there.
All of this is just a forecast, of course, but we’re probably not alone in hoping that 2021 will proceed in a much more orderly way than 2020 did. We’ll keep you updated with regular monthly and quarterly reports as the year progresses. Until then, best wishes for the coming year and cheers to a new and better beginning in 2021!