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 Bend, 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 buying or selling a home in Bend 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.
Spoiler alert: your chances of “buying low” in 2021 and beyond are probably slim to none. We’ll tell you why, but first, we’re going to take a thorough look at what happened in Bend’s market in 2020. It has been an unprecedented year in many ways, and that certainly applies to the residential real estate scene in Bend.
Predicting the future with any degree of accuracy is usually more about understanding the past than anything else. After giving a brief overview, we’ll go into the hard numbers and then extrapolate from there to give you our 2021 forecast for Bend.
Sound good? Let’s stroll down memory lane, though you may just want to skip ahead if 2020 is a little too raw to revisit quite yet. Click here to cut to the chase and read our bottom line forecast for Bend’s real estate market in 2021.
How COVID-19 Impacted Bend’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 the opening of 2020. 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%.
Bend’s real estate market was looking pretty good itself at the beginning of 2020. In January and February, pending sales were up 15% and new listings were up 6% year-over-year. The scene was set, in other words, for a strong seller’s market, with competition ramping up among buyers and overall inventory dropping.
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 generally weren’t listing non-vacant properties. Small businesses began to go underwater and many people lost their jobs or were furloughed. In April, pending sales were down a whopping 46% year-over-year, while new listings were down 48%.
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 Bend’s market and markets across the country. By the end of June, pending sales were already up 25% year-over-year and more than double what we saw in April of 2020. That was just an appetizer, however, for what was to come. In both July and August, pending sales went up close to 50%.
Sellers began to reenter the market toward the end of the summer, but new listings were still down 9% year-over-year, and it was too little, too late. In other words, an unprecedented wave of buyers hit Bend’s market just as inventory was reaching historic lows.
Rising prices were the predictable result, and boy did they rise. Residential properties sold for a median of $539,500 during the third quarter of 2020, a remarkable 14% year-over-year increase.
Even as the busy summer buying season came to a close, Bend’s market wasn’t done heating up. Prices continued to climb heading into the fall, and by the end of November, the median sale price for residential properties in Bend had reached a record-high $567,500. That’s an increase of 16% from 2019’s high-water mark of $475,000.
In October and November, sellers were eager to take advantage, and new listings were up 27% year-over-year. It still wasn’t enough, though, to create any meaningful surplus of inventory.
Buyer activity finally started cooling down and was flat by the end of November, but that had more to do with a lack of available inventory than a lack of buyer interest.
How do Bend’s numbers look for 2020 as a whole? Pending sales were up 14% in 2020, while new listings were down 4% total. Those numbers don’t seem so drastic, but the total disparity between buyer and seller activity was enough to significantly alter the balance of Bend’s real estate market.
There’s one figure that really tells us all we need to know about the state of Bend’s market heading into 2021. As of publication, the total available inventory of residential properties in Bend’s city limits was just 185 homes. At the end of 2019, that figure was 720 homes.
That’s a drop of 74%, and that’s why prices are still climbing up in Bend. Through 2020, residential properties in Bend sold for a median of $510,000, up 11% from 2019. In the second half of 2020, though, the median sale price was $559,000, up 18% year-over-year. That latter figure is much more indicative of the momentum heading into 2021.
Who Bought a Home in Bend in 2020, and What Did They Buy?
While the numbers above give a broad overview of Bend’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 onto your lattes.
According to the Portland State University population research center, Bend’s population grew by 14,645 people between 2010 and July of 2019, almost all of that surplus coming from migration into the city. A relatively recent report compiled by the Oregon Employment Department can give us a good sense of how many of those people came from out of state.
Between the 2017 and 2018 tax years, Deschutes County, home to Bend, gained a net total of 4,091 new residents after subtracting for births and deaths. That’s more than any other county in the state, even much more populous ones.
Of those 4,091 new transplants, 813 came from other parts of Oregon, while the rest were from out-of-state. California, not surprisingly, accounted for the vast majority, with 2,100 residents moving in. Washington was a distant second at 651 new transplants.
Bend makes up 47% of the total population of Deschutes County, so we can cut those numbers in half to get a good sense of how many people are moving to Bend from California and other states. The answer is a lot.
The story is still being written on 2020, but we have every reason to suspect that 2020’s buyer wave was fueled largely by out-of-state transplants moving from more expensive markets. Exhibit number one: buyer activity in Bend’s premium ($800k-1m) and luxury ($1m+) markets almost doubled in 2020. Sales increased by 91%, while new listings increased by 59%.
An uptick in new luxury construction accounted for some of that new inventory, but there was also something of a selloff in 2020. Buyers just grabbed all of it up–and then some.
Our guess? A number of folks took advantage of Bend’s hot market to sell vacation homes and second residences and free up their cash for other investments. Buyers, on the other hand, came to Bend’s luxury market seeking to relocate permanently. Call it a hunch.
Homes in the $650-800k range also saw a significant spike in activity in 2020. Sales grew by 32%, while new listings increased by 9%. At the $500-650k price point, sales increased 12% year-over-year, while new listings were up 3%.
In the $400-500k range, sales and new listings stayed relatively flat between 2019 and 2020. Then, in the $300-400k range, sales were down by 20% and new listings were down 30%. What about the bottom end of Bend’s market? New sales in the sub-$300k range were down 54% and new listings were down 72% in 2020.
Fewer buyers entered the market for starter homes in Bend, but it’s quickly becoming the case that “starter homes” simply don’t exist in Bend. Where they do exist, they tend to be significant fixer-uppers. Homes that sold in the upper $300k range in 2019 likely sold in the low $400k range in 2020.
The overall picture is clear. More buyers are entering the upper end of Bend’s market, and there is a big disparity between buyer activity and seller activity. More people in higher-end homes made a move, but it wasn’t enough to meet unprecedented buyer demand.
That disparity appears to be less in the lower-middle end of Bend’s market. In reality, though, more buyers are competing for the same number of new listings, and they’re getting less and less for their dollar. A home that sold in the high $300k range in 2019 is now selling in the low $400k range.
The situation appears dire for would-be buyers at all price points in Bend. At the same time, 2020 was obviously a unique year. Is there any hope in sight?
We promised a Bend 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 Bend 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. We mentioned that we think more people are relocating permanently to Bend rather than living here just part of the year, and we think remote work is a big factor making that a possibility. While the narrative about people fleeing urban centers for suburbs for small cities appears to be overblown, Bend is still an attractive niche destination for those looking to escape Silicon Valley, Seattle, or other urban environs. That will drive more people here in the years ahead.
People move to Bend 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. Maybe you’ve taken up mountain biking, fishing, cross-country skiing, or just taking a stroll at the local park, and want to live somewhere you can orient our life more around these activities.
Maybe spending more time at home has given you 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 this shifting sense of 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 Bend’s which offer tangible lifestyle benefits.
In other words, we don’t think 2020’s real estate boom was an anomaly for Bend, but a sign of things to come. Let’s look at how 2021 will play out.
Our 2021 Forecast for the Bend Real Estate Market
At the beginning of 2021, COVID-19 will still be a large presence, and we will continue to see a significant reduction in new listings compared to the winters of 2020 and 2019. At the same time, there will be more buyers competing for the limited inventory that is available. There are a number of folks who entered Bend’s market in the summer or fall who couldn’t find a home or made offers that weren’t accepted, particularly in the sub-$500k or $600k range, and they will still be looking.
It’s hard to overstate just how low Bend’s inventory is right now. Of the 185 residential properties available on the market as of publication, 90 are listed for $800,000 or more. For sub-$800k homes, just 0.4 months of inventory are available. Many of the homes that are available have sat on the market for several months already due to pricing, location, condition, or other factors. When new, desirable inventory comes on the market, it will continue to go fast, even during the winter.
Builders will be working overtime in 2021 to try and keep up with the new demand, but we don’t expect it to be enough to alter the trajectory of Bend’s market. Buildable land in Bend remains scarce and quite expensive. Although the city approved an expansion of its urban growth boundary in 2016, not a single lot has been developed. Infrastructure costs and systems development charges remain prohibitive for builders of single-family homes, and multifamily housing will make up about 50% of new development.
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.
Especially if vaccinations go well and COVID-19 is firmly on the downswing, we may see a healthy amount of new inventory in the late spring or early summer. Sellers may feel more comfortable listing homes they plan to continue to occupy through closing.
At the same time, we will also see a flood of new buyers. While many people decided to go ahead with a move during the pandemic, many others felt the inspiration but decided to hold off until the Coronavirus was less of an issue. Bend has been on their radar, and they will be showing up next spring and summer.
In other words, the scene is set for prices to rise in 2021 just as much as they did in 2020. Inventory toward the upper-middle end of Bend’s market will continue to be bought out at a disproportionate rate, leading to a squeeze in the $500-650k and $650-800k ranges.
Of course, you won’t be able to get as much at those price points as you did in 2020. When sub-$800k properties hit the market in some of West Bend’s most desirable neighborhoods, like Century West and Awbrey Butte, they will go fast. The markets in River West and Old Town will be particularly hot in 2021, with reopening inspiring people to move in closer to all the action.
A higher proportion of sub-$400k homes will be moderate fixer-uppers, and even homes closer to $500k in the desirable areas around Bend’s city center will be ripe for cosmetic updates. Savvy buyers will do well to target these properties, however. Navigating Bend’s market as a buyer will be all about coming in with realistic expectations, while at the same time being willing to think outside the box and see possibilities where others don’t.
Maybe the most important thing we can say about Bend’s market in 2021 is what we’ve been saying for a while: this is not a bubble. Bend’s market is no longer being driven by speculation. Instead, it’s being driven by people wanting to live here, and that reached a critical mass in 2020.
Bend simply isn’t getting any cheaper, even in the event of an underwhelming economic recovery in 2021. With inventory stretched as far as it already is, even a small uptick in demand would have an outsize impact upon prices, and the end of Coronavirus-related restrictions could be a perfect catalyst for that. The only real bear case for Bend’s real estate market in 2021 would be a cataclysmic economic event that would affect the entire U.S. housing market.
In the next few years, we do expect an uptick in working families leaving Bend for more affordable areas, Redmond included, and quite possibly out of state. We are as big of advocates for affordable housing options as anyone and hope that the City of Bend can get its act together in removing barriers to the construction of affordable single-family housing.
For now, though, Bend’s market clearly isn’t trending toward affordability. Our forecast for Bend’s market in 2021? We’re expecting prices to appreciate between 12% and 16%.
While that may be grim news for many buyers, the flip side is that the investment you make today can pay significant dividends in the future. The rough-looking home that you buy in the Orchard District could be worth quite the pretty penny in five or ten years when it’s Bend’s hottest up-and-coming neighborhood.
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!