Last Updated January 11, 2022
Bend’s real estate market basically caught fire in 2021. After a remarkably busy second half of 2020, we expected some return to normalcy in 2021, but it turned out just to be an appetizer for an unprecedented buying rush.
The median sale price for all residential properties in Bend rose an incredible 26% year-over-year. Hopefully it won’t spoil the plot to say that we don’t expect prices to climb that much in 2022. But apart from that, what’s in store this year? Join us as we offer… our 2022 Bend real estate market forecast.
What Drove Bend Home Prices so High in 2021?
First of all, let’s take a look at the factors which spun Bend’s market into a frenzy in 2021. From there, we can forecast whether those same factors might affect the overall picture in 2022.
Over the course of the year, inventory actually increased in Bend. New listings were up 6% year-over-year, while closed sales were down 1% and pending sales down 4%.
Theoretically, that should indicate less buying pressure and a reduced likelihood of price increases. Still, there’s some nuance involved.
Low interest rates and supply chain constraints were obvious contributing factors, reflected in price increases nationwide. Across the United States, homes sold for an average of 19% more than they did in 2020.
That helps put Bend’s price gains into perspective. Still, let’s look at two different factors which led Bend’s market to appreciate even further than the national average: first, an unprecedented inventory crunch during the crucial spring buying season, and second, an explosion of activity in Bend’s luxury market.
How a Spring Inventory Crunch Fueled FOMO in Bend’s Market
In February and March of 2021, Bend’s housing inventory hit an all-time low of 0.6 months. Such drops are common during the winter months, but this was exceptional. In comparison, Bend’s inventory stood at 2.1 months in February of 2020.
The scene for this unprecedented inventory crunch was first set in the summer of 2020. Sales began to outpace new listings in July, and listing activity wouldn’t again surpass buyer activity until February of 2021.
By that point, buyers were already chomping at the bit to enter the market, and Bend’s spring buying season began earlier than ever before. Interest rates were still low but steadily rising, and FOMO (fear of missing out) became the dominant emotion. Sales surged in March and April, just as inventory was at its lowest point.
Sales numbers from the spring don’t fully convey the amount of buying pressure Bend’s market experienced at that time. A remarkable number of buyers were making repeated offers on properties without winning out over the competition.
Bidding wars became the norm, and by May, homes sold for an average of 104.2% above list price and were going off the market in a median of just 4 days. In spite of steady inventory increases leading into the summer, sellers justifiably felt a license to be more aggressive. Prices continued to soar, peaking at a $675,000 median in July.
But there were signs that sellers had begun to set their sights too high. New inventory meant less desperation from buyers and fewer bidding wars. Prices flattened somewhat, and inventory peaked at 1.6 months in September. But the bottom-line didn’t shift significantly.
By September and October, new listings dropped significantly, while buying pressure remained relatively robust. By December, inventory was down again to 0.8 months.
November of 2021 saw a new record median sale price of $690,000, unheard of during the colder months in Bend. The reason? Pending sales of $1 million-plus homes spiked at the very same time the rest of Bend’s market experienced a steeper than normal decline. In other words, Bend’s entire market shifted toward the upper end, pulling the median higher.
That trend may continue in 2022. For now, though, let’s look at how Bend’s luxury market affected the overall picture in 2021.
How Bend’s Booming Luxury Market Shifted the Needle in 2021
The numbers say it all: in 2021, sales of million-dollar-plus homes in Bend rose 93% year-over-year. At the $1-1.5 million price point, there were 19% more sales than new listings, a bigger gap between buyer and seller activity than we saw in any other segment of Bend’s market.
In 2020, million-dollar-plus homes made up 11% of Bend’s total sales, but in 2021 that figure doubled to 22%. That’s a huge shift.
In part, it’s a byproduct of overall appreciation – a home that sold for $800,000 in 2020 would sell, on average, for about $1,000,000 in 2021. But luxury properties up to $1.5 million are now selling at a faster rate than they’re hitting the market.
That would have been completely unimaginable just a year ago. Up until recently, buying pressure had been lowest at the top of Bend’s market, with buyers taking plenty of time to find the perfect property at the right price. Now, there’s a lot more competition, and fewer sellers relative to buyers.
Simply put, people who can choose to live anywhere – or have a vacation home anywhere – are choosing Bend. The pandemic accelerated the process that was already leading people here.
Is Bend’s Market Cooling Down? Making Sense of the Conflicting Signals
All else being equal, the sky-high sale prices we saw in November should indicate a heating market. Nonetheless, several other numbers from Bend’s year-end data paint a contrasting picture.
In December of 2021, the median days on market swelled to 18, a 200% year-over-year and 66% month-over-month increase. Meanwhile, homes sold for an average of 97.7% of their listing price, lower than any month since June of 2020.
Those figures coincide with a record median $772,000 asking price in December. That’s a massive 14% month-over-month increase. December’s listings weren’t especially weighted toward luxury properties, so the obvious conclusion is that sellers are getting greedy.
Inventory was extremely low at the end of the year (0.8 months), and pending sales continued to surpass new listing activity. But buyers are clearly experiencing sticker shock, and we expect more people to start saying “No thanks” heading into the New Year, especially if sellers continue to overplay their hand.
It isn’t news that it’s virtually impossible to find a home in Bend under $400,000. In 2021, new listings of these properties were down 70% year-over-year. By December, however, new listings between $400-550k were also down 73% year-over-year.
As the 2022 buying season gets underway, would-be buyers will face the choice of paying $500k or $525k for a relatively mediocre property or looking elsewhere. That isn’t to say we expect any kind of mass exodus – plenty of buyers will continue to bite, but we won’t see a repeat of 2021.
Basically, we foresee several different possibilities for Bend’s real estate market in 2022. Read on, and we’ll offer our forecast.
The 2022 Forecast for Bend’s Real Estate Market
The first few months of 2022 will be pivotal in determining the direction of Bend’s market. Here’s how we see things shaking out.
Inventory is low. In fact, it’s just as low as it was at the end of 2020, and we all saw what happened in the spring of 2021.
Buyer demand has remained steady through the last quarter of the old year. That trend could continue, and inventory could continue to drop to record lows, setting the scene for another hyper-competitive spring buying season.
However, the median listing price in Bend is now 43% higher than it was a year ago. The market had room to run in 2021, but that’s no longer the case. Another factor: as of publication, the average rate for a fixed 30-year mortgage is 3.22%, compared to 2.9% a year earlier.
As a result, the barrier to entry is now prohibitively high for many people, particularly first-time homebuyers. Demand won’t evaporate overnight, but properties will sit longer on the market than they did a year ago. Inventory will remain low through the winter, but this time around, the mood will be very different heading into the spring.
At the beginning of 2021, COVID-19 vaccines were just starting to roll out, and there was a lot of optimism that life would return to normal soon. A year later, by contrast, there is collective weariness as yet another variant rolls its way through the population. The broader economic picture is unclear, but there are signs that equity markets are beginning to fray at the edges, and interest rates are likely to continue rising into 2022.
Adding together all of the above factors, it’s hard to see buyers being as enthusiastic in 2022. But there is an ex-factor we haven’t brought up yet: real estate investors.
Bend’s rental rates appreciated just as much as real estate sales in 2021, rising 26% year-over-year. While properties at the lower to middle end of Bend’s market may be less attractive to first-time homebuyers, investors are likely to scoop up any surplus of inventory.
These buyers are unlikely to be as aggressive as those who flooded Bend’s market in early 2021, but demand will still be significant, especially in the early spring.
Anectdotally, we have a number of clients who have been watching Bend’s market through the winter and finding nothing of interest. When new inventory does hit the market, there will be a lot of pent-up demand. That will lead to an initial surge of FOMO, but we expect it to be short-lived.
If buyer demand stays relatively tepid – as we’re expecting – there could be a spike of new inventory mid-spring, and buyers may suddenly find themselves with slightly more choices and a bit less competition.
In 2022, properties in the best locations with the most desirable finishes will continue to sell for a premium, but more run-of-the-mill homes could languish a bit longer before finding a buyer at below list price.
Bend’s sellers have become accustomed to holding all the leverage, but that will start to shift in 2022. Notice that we say “start to shift.” Barring any new black swan events, Bend will remain very much a seller’s market for the foreseeable future. But sellers will need to take more steps in 2022 to make sure that their properties stand out.
That doesn’t mean prices will drop, however. On the contrary, we expect steady appreciation through the spring and summer of 2021.
Bend’s median sale price should surpass $700,000 at some point in 2022 – it’s only a manner of time. We are expecting Bend’s market to appreciate at least 10% overall in 2022.
The luxury market should continue to have an outsize impact on Bend’s price growth. With demand up sharply in the $1 million to $1.5 million price range, competition could be even stiffer this year.
Meanwhile, the $650-800k price point will also remain relatively competitive, as it represents a primary target for buyers moving from equally or more expensive markets out-of-state.
Basically, buyers shouldn’t expect to find any bargains in 2022, even if the expected cooloff materializes. The shift toward a less competitive market will be incremental, unfolding over the next several years as new construction fills in some of the gaps. We don’t have data specific to Bend, but nationwide, new housing starts were up significantly in November, a promising signal for new inventory.
The bottom line is that Bend’s market is changing rapidly, and buyers and sellers alike need to understand the market in order to have the best shot at winning the day.
That’s precisely where we come in. Naturally, we’re ready to give you much more personalized advice about how the state of the market might inform the decisions you make in 2022. Contact our Bend office, and we’ll provide the context you need to make the right decisions to realize your aspirations in the New Year and beyond.