Last month, we took a deep dive into how Bend and Eugene’s real estate markets might respond to a post COVID-19 recession. What we didn’t have at the time was a whole lot of market data. But now that the numbers for April are in, the picture is becoming clearer.
The last time the United States entered a recession, it took several years for most real estate markets to feel the full impact. That was true in Bend and Eugene, with property values finally bottoming out in 2011 and 2012 respectively.
The situation in 2020 is very different, however. There’s an immediacy to the pandemic that is already having a substantial impact on the real estate market. As you’ll see when we analyze the market data for April, we’re seeing that impact in Bend and Eugene in terms of the number of new listings and pending sales.
At the same time, there is a separate but interrelated trajectory that will play out over time. Home values haven’t shifted overnight. Over time, there is bound to be an impact, but how that happens will depend upon factors both global and local.
Let’s take a closer look at the data.
What Bend’s Market Looked Like in April of 2020
In March of 2020, Bend saw an increase in new listings of detached single family homes compared to the previous year (+20%) but a drop in pending sales (-19%). Meanwhile, the median sale price was a $473,000, just a 3% increase from the year before.
Homes that sold in March by-and-large went pending in January or February, before the scope of the pandemic became clear. The median sale price for April dropped slightly, falling to $445,000. That’s a 2% decrease from the year before.
There’s more bad news: listings decreased from 364 in April of 2019 to just 212 in April of 2020. That’s a 42% drop.
April is normally when new listings start to really pick up in Bend, leading up to a peak in May in time for the summer buying season. We can only assume that a large number of people who had planned to put their homes on the market held off in April because of COVID-19.
Looking at March’s spike in listings, some may have put their homes on the market earlier than they’d planned, fearing worse to come.
The important question, of course, is how buyer activity has corresponded to this significant dip in inventory. What we see is a comparable drop with just 167 pending sales in April of 2020 compared to 288 a year earlier. Again, and quite uncannily, that’s a 42% decrease.
The net effect is that the balance hasn’t shifted (yet) in Bend’s market toward either the buyer or seller. An equal number of would-be buyers and sellers are hesitating to enter the market. When they do, it’s still pretty much business as usual, perhaps with just a few added delays.
Properties actually went off the market faster in April of 2020 than they did a year ago, spending an average of 58 days on the market compared to 84 in 2019.
We wouldn’t chalk this up to anything on the buyer’s side necessarily. Those most hesitant to list their homes are probably those with homes that would sit on the market even under the best of circumstances.
We’ll interpret the data further and look toward what we might expect in the future for Bend, but first, let’s look at the numbers for Eugene.
What Eugene’s Market Looked Like in April of 2020
To cut to the chase, we’re seeing the same pattern in Eugene that we’re seeing in Bend. It isn’t quite as pronounced, however.
In March of 2020, new listings jumped 17% compared to March of 2019, while pending sales dropped 21%. Let’s linger on these numbers for a moment.
An increase in inventory and decrease in buyer activity are the usual hallmarks of an economic recession. More people need to sell, and less people are able to buy. The result is downward pressure on prices–if that dynamic continues, anyway.
But what about a market where both inventory and buyer activity are decreasing at the same time? That’s what we saw happening in Bend in April, and that’s what we’re seeing in Eugene.
210 detached single-family homes were listed in Eugene in April of 2020 compared to 283 in April of 2019, a 26% drop. Meanwhile, 166 homes went pending compared to 215 a year earlier, a 23% drop.
Here again, leverage hasn’t shifted significantly in either the buyer or seller’s direction. People are simply hesitating to enter the market.
For now, the option of mortgage forbearance makes a sell-off unlikely in the near future. But it may not be too long before the tide begins to shift.
A big factor driving the current drop in inventory is safety-related concerns, particularly in owner-occupied homes. These fears will continue to be a factor in the months ahead, but at some point new inventory will outpace buyer demand.
For now, home values in Eugene appear to be stable. April sales actually set records in Eugene, with detached single-family homes going for a median of $371,500, up an incredible 11% from 2019’s median sale price of $330,000.
April’s pending sales, however, were listed for a median of $352,000. These homes spent a median of 29 days on the market, compared to just 7 days a month earlier.
These numbers tell us that we’re just beginning to see COVID-19’s impact reflected in the market data. Read on as we analyze what that means for Bend and Eugene’s markets.
What’s in Store for Bend and Eugene’s Markets
The first point we’d like to make is that we see Bend and Eugene’s markets following parallel but slightly different trajectories. Activity is down more in Bend (-42%) than it is in Eugene (-25%).
The most obvious reason for this disparity is that Eugene’s inventory is lower than Bend’s. Coming into the spring buying season, there were simply less homes available than there were in Bend.
Homes in Eugene also go off the market significantly faster. In uncertain times, sellers are much more likely to list if they think they can get a quick sale.
Notably, Eugene homes that went pending in April of 2019 spent a median of 29 days on the market. In April of 2019, that number was only 7 days. Moving forward, Eugene’s less desirable properties will stay on the market significantly longer, but the most compelling homes will continue to move fast.
Compared to Eugene, many neighborhoods in Bend had more inventory moving into the crisis. At the same time, Bend remains a low inventory market. But with homes spending longer on the market, the decision to sell is more complicated.
In addition, a significant portion of buyers in Bend are looking for vacation homes and second residences. Anecdotally, we don’t believe these buyers are fleeing Bend’s market for good, assuming they still have the resources. Many, however, are postponing that decision.
All that being said, what lies ahead for Eugene and Bend?
Here’s What We See in Our Crystal Ball
Up to this point, both Lane County and Deschutes County have done well at containing the spread of COVID-19, with 55 and 80 confirmed cases respectively.
That’s good news, but there’s still potential for the virus to spread. Some Oregon counties will likely begin reopening May 15 but will be required by Governor Kate Brown to meet particular benchmarks involving testing, contact tracing, and declining infection rates.
The result will be a step toward normalcy. The precautions being taken will lessen the chances of a second wave, but there are no guarantees. Still, we expect market activity to begin to pick up again in June in both Bend and Eugene.
If Lane County and Deschutes County aren’t forced to shut down again, market activity may start to approach normal levels mid-summer.
There may even be a quite significant influx of new listings, with those who had held off in the Spring deciding to move forward. Particularly in Bend, we expect new listings to outpace new buyers. However, with new construction likely to drop off significantly, inventory is unlikely to swell too much in the medium-term.
There is a real potential for prices in Bend to continue leveling off or even drop slightly. In the months ahead, we expect prices to stabilize relative to the April numbers. However, there’s the potential for new inventory to put downward pressure on prices. All the same, inventory is extremely unlikely to accumulate to the point where prices start to drastically fall.
In Eugene, we’re already seeing signs that the market is flattening, but we don’t think new inventory is as likely to outpace buyer activity. As a result, prices will be relatively stable.
Looking further into the future, that picture will depend upon broader economic factors. Unemployment in certain industries, including the restaurant, retail and travel industries, and perhaps construction and manufacturing, will remain high into the foreseeable future. In addition, it will be a while before most AirBnB and vacation rentals can bring in enough cash to pencil out.
For many folks, mortgage forbearance is proving a good temporary solution. But it can only be a solution if the problem itself is temporary. Some homeowners will be able to get right back on their feet before that window ends, but others will be less fortunate.
The impact will be felt in real estate markets nationwide, Bend and Eugene’s included. There’s still no reason to expect that the long-term impact will be anywhere near as drastic as the post-2008 free-fall. But some version of that may be inevitable.
It’s important, however, to know what kind of time frame we’re looking at. Bend and Eugene’s markets will most likely see a holding pattern for the remainder of the year and for the first part of 2021.
We’ll keep you posted as the situation develops. In the meanwhile, homeowners may want to consider getting a head start and avoiding what is likely to be fiercer competition once the summer gets underway.
For now, prices will continue to be relatively stable in both Bend and Eugene. That may not be the case forever, though, unless the economy gets back on track sooner than later.
In any case, the more you can do to ensure a quick sale, the less likely you’ll be to run into choppier waters. We can certainly give you plenty of suggestions for how to accomplish that.
Right now, buyers are benefiting from less competition than normal. We see more buyers hitting the market in the summer, so now may be a good time to look if you’re after a home at a competitive price point in Eugene and Bend’s most desirable neighborhoods.
On the other hand, if you’re feeling priced out of Bend and Eugene’s markets, you might want to wait it out for more favorable conditions on the buyer’s side. That will most likely happen, but it may take a lot of time, particularly in Eugene. And if the economy comes roaring back, the effect may be minimal.