Late last year, we predicted a minor but noticeable cooling-off of Bend’s real estate market, particularly at the upper-middle end. That prediction held true through the winter, but come spring, Bend’s market started to heat back up. Inventory was lower than the year before across most price points, with the exception of properties in the $600k-1 million range.
Well, the numbers are in for the third quarter are in, and all signs of any impending cooldown have all but disappeared. Compared to the third quarter of 2018, inventory is now down across all price points. The upper end of the market, surprisingly, is seeing the most significant drop in inventory.
Meanwhile, sale prices for detached single-family homes hit a median of $479,000. Though that’s only slightly higher than Q2’s median of $474,000, it’s an 8.8% increase from 2018’s third-quarter median of $440,000. The gains of the second quarter seem not to have been a fluke.
Bend’s slowdown, in other words, seems to have come and gone, and the market here is again appreciating at an extraordinary level. The question is whether these gains are sustainable or not.
We’d argue, based on the most recent data, that it is sustainable–through the foreseeable future, at least, barring the usual doomsday scenarios.
Certain segments of Bend’s market may eventually reach a saturation point. But, as long as inventory remains low and money continues to flow in from out-of-area, we can’t foresee prices leveling-off, much less dropping. For better or for worse, Bend’s market is still on a steady upward trajectory.
3rd Quarter Bend Market Report for Luxury Homes ($1 million-plus)
For evidence that out-of-area money is still flowing in to Bend, exhibit A is Bend’s luxury home market. The inventory for million dollar-plus properties in Bend has dropped from 9 months through the 3rd quarter of 2018 to 6.8 months in Q3 of 2018, a record low. 67 million dollar-plus homes sold through the third quarter of 2019 versus 47 in Q3 of 2018.
The average number of days these spent on the market is now down from 152 days to 113 days. Luxury homes in Bend sold for an average of 94% of list price, compared to 92% in the third quarter of 2018.
Our main takeaway from these numbers is that Bend is only becoming more and more of a destination for luxury home buyers. A steady stream of new construction at this price point has hit the market through the past few years, but it’s by no means more than the market can absorb. Meanwhile, bare lots with the mountain views that are almost mandatory at this price point are bound to become scarcer and scarcer within Bend’s city limits.
3rd Quarter Bend Market Report for Premium-Plus Home ($800k-1m)
The second quarter of 2019 saw a drop in sales for homes at this price point and an increase in inventory. The third quarter, however, saw just the opposite, with 63 homes selling in the $800k-1m range compared to 49 in the third quarter of 2018. Inventory is down from 5.7 months to 4.8 months.
Homes at this price point are spending longer on the market than any other in Bend, at an average of 121 days. This is still lower than Q3 of 2018’s average of 129 days on the market.
Homes in the $800,000+ range are concentrated almost exclusively in Bend’s desirable northwest quadrant. Go down a tier to the higher part of the $600-800k range, and there are plenty of homes for sale in southeast and southwest Bend that are on par with their more expensive northwest counterparts.
With that kind of competition, homes in the $800-1m range aren’t selling as fast. At the same time, we’re not seeing demand for them dry up either, contrary to our expectations heading into 2019.
3rd Quarter Bend Market Report for Premium Homes ($600-800k)
The story is much the same at this price point in terms of a modest increase in sales and decrease in inventory. 144 homes sold in the $600-800k range during Q3 of 2019 compared to 121 a year earlier, and inventory dropped from 4.1 to 3.3 months.
Listings at this price point spiked in the second quarter of 2019 more than in any other segment. However, Bend’s market has been more than able to absorb that additional inventory. Homes in the $600-800k range are spending about as much time on the market as they did a year earlier (97 days in Q3 of 2019 versus 100 in 2018.)
3rd Quarter Bend Market Report for Trade-up Homes ($450-600k)
Bend’s inventory of homes in the $450-600k range dropped somewhat in Q3 of 2019 compared to a year earlier, falling from 2.9 to 2.6 months. Meanwhile, sales increased slightly from 193 in Q3 of 2018 to 206 in this third quarter of this year. These properties are spending slightly longer on the market, however, at 100 days versus 95 a year earlier.
These figures contrast with what we saw in the second quarter of 2019, when the $450-600k range saw a steeper decrease in inventory than any other price point. It’s noteworthy that inventory is starting to decrease more at the higher rungs of Bend’s market. Things are still tight in the $450-600k range, however, and don’t look poised to become any less tight.
3rd Quarter Bend Market Report for Starter Homes ($300-450k and less than $300k)
Slowly but surely, Bend’s market activity is migrating away from sub-$450k properties. There are still plenty of these homes available in Bend’s east side, however.
For homes in the $300-450k range, inventory is down only slightly from Q3 of 2018, at 1.7 months versus 1.8 months. Still, overall sales are down from 407 a year earlier to 355 in Q3 of 2019. This follows the same trend we saw in the second quarter. The average days on the market did decrease from 92 in Q3 of 2018 to 82 in Q3 of 2019.
The reason is simple: less and less new construction is going on the market at this price point. Through the first three quarters of 2019, 148 homes newly-constructed homes hit the market in the $300-450k range. During the first three quarters of 2018, that number was 263.
If anything, it’s surprising that inventory didn’t drop even more. We can only speculate that would-be buyers at this price point are increasingly looking for housing in Redmond, Three Rivers, and other communities outside Bend’s city limits.
They’re certainly doing so in the sub-$300k range, which is simply ceasing to exist in Bend apart from a few handfuls of fixer-uppers. Between Q3 of 2018 and Q3 of 2019, inventory dropped from 1.1 to just 0.6 months. Unsurprisingly, sales dropped from 42 to just 26.
In Conclusion: Where Does Bend’s Real Estate Market Go from Here?
The good news, which we’ve been sharing for a while, is that Bend’s market isn’t headed for a bubble in the foreseeable future. But not only that, the upper and middle rungs of the real estate market here actually seem to be in exceptionally good health, driven by an influx of capital from the nearly 20 people that relocate to Deschutes County every day.
Everything that we’re seeing indicates that Bend’s market hasn’t yet reached the peak of its upward trajectory. After a relatively sluggish 2018, the market could have gone in one of two different directions, and instead of continuing to flatten out, it’s bounced right back.
We would suggest that the best reason to buy a home in Bend is because you want to live here, not because you’d like to cash out at a future date. But, would-be Bend homeowners can at least rest assured that they’re making an investment that’s likely to appreciate.
Conversely, if you want to live in Bend but are waiting for the market to cool off so you can swoop in and grab a bargain, you may find that Bend’s prices only get further and further out of reach. The bad news is that Bend is increasingly becoming a place where ordinary working families can’t afford to own a home, and the data doesn’t show any relief in sight.