Last Updated January 27, 2023
The old year has come and gone, and it’s time to set our sights on what’s in store for Bend and Eugene’s real estate markets in 2023.
Let’s get it out of the way right off the bat: we can’t predict the future, and neither can anyone else. What we can do is understand the past and see how we’ve come to where we are today.
From there, it’s a matter of examining the different possible directions our local markets might take as we move further into the New Year.
“Local” is a key word here. Real estate is location-specific.
There are certain insights we can gain by taking a birds-eye view. Mortgage rates are high all across the board, and that’s had a particular impact on markets everywhere.
- A Tale of Two Halves: How Real Estate Markets Shifted Nationwide in 2022
- Why Markets Haven't Cooled Too Much – and Why We Won't See a Repeat of 2008
- 2022 in Review for Bend, Oregon
- 2022 in Review for Eugene, Oregon
- Our 2023 Bend & Eugene, Oregon Real Estate Forecast
- In Conclusion: What Bend and Eugene Buyers and Sellers Need to Know in 2023
But when it comes to putting your particular property on the market or buying a particular home at a particular price point in a specific neighborhood, generalizations can be misleading. That’s why it’s important to zoom in and see whether or not the facts on the ground match what you’re reading and hearing.
We’re here to help you do just that. We’ll start with a review of what happened in 2022 then proceed with our 2023 real estate forecast for Bend and Eugene.
A Tale of Two Halves: How Real Estate Markets Shifted Nationwide in 2022
At the beginning of 2022, inventory levels were at historical lows in many real estate markets throughout the United States. Bend and Eugene’s markets were no exception.
Bend’s market bottomed out at just over half a month of inventory in February 2022. That same month, Eugene’s residential inventory fell to just 0.4 months.
Even though winter is typically a slower time for real estate, mortgage rates were still hovering below 4%, and buyer demand was strong relative to extremely limited supply.
We’ll go into greater detail below about exactly what happened in Bend and Eugene. For now, it should suffice to say that the picture was drastically different in the second half of the year.
By the beginning of July 2022, mortgage rates were firmly set in the mid 5% range. By mid-October, they were close to 7%.
All across the country, that movement corresponded to a chilling of buyer activity. Nationwide, December sales dropped 34% year-over-year. That’s a bigger decline than at any point since 2010 (apart from the very beginning of the pandemic.)
Why Markets Haven’t Cooled Too Much – and Why We Won’t See a Repeat of 2008
The dynamic we’ve described has led many to speculate that a housing market crash on par with the Great Recession of 2008 might be in store.
But, as we covered already in another article, “When Will the Housing Market Crash in Oregon,” the chief difference between now and then is that housing inventory is much, much lower. Toward the end of 2022, 1.14 million homes were up for sale nationwide, compared to 4 million in 2007.
There’s a big gap between what buyers could afford at the beginning of 2022 versus what they can afford now. But, while nationwide price growth cooled off significantly beginning in the second quarter, prices were still up 2.3% year-over-year in December.
Entering into the New Year, average housing inventory throughout the U.S. sits at 2.9 months, about half the historical norm. That’s kept prices high relative to most people’s purchasing power.
Simply put, people aren’t listing their homes for sale unless they have to. Meanwhile, new construction has slowed significantly. In December of 2022, new housing starts were down almost 22% year-over-year.
Clearly, these dynamics will have a big impact on the direction the real estate market takes in 2023. But first, let’s take a closer look at how they impacted Bend and Eugene’s markets in 2022.
2022 in Review for Bend, Oregon
Looking at Bend’s overall numbers, 2022 was an extraordinary year for market appreciation. Homes sold for a median of $730,000, up 13% year-over-year.
In reality, though, that figure doesn’t tell the whole story. Bend’s price action was actually quite volatile throughout the year, peaking at a median of $787,500 in February and falling to a median of $662,000 in December.
If we were to chart out Bend’s price trajectory from the second quarter of 2022 to the end of the year, it might look like free fall. But it’s important to contextualize those numbers.
Bend’s inventory at the beginning of 2022 was way, way lower than anything we’ve seen historically. The work-from-home revolution coupled with a hot luxury market brought a ton of transplants to the area.
That drove Bend’s real estate market to appreciate 26% in 2021. February’s sale prices represent an additional 22% hike on top of 2021’s median.
With the benefit of hindsight, we can comfortably call Q1’s price action a scarcity-induced bubble. Those kinds of prices were never going to be sustainable.
At the beginning of last year, we predicted that Bend’s market would cool down after a bump in the spring. What we didn’t expect was just how strong demand would remain through the winter.
Now, entering into 2023, the last few months’ price decreases probably sting for buyers who purchased their homes at the peak. But, how much your investment has depreciated – on paper, at least – depends in large part on what you bought and where you bought it in town.
We pulled numbers for several of Bend’s larger subdivisions to see how their price action tracks with the overall numbers and what any disparities might reveal about the state of Bend’s market.
Northwest Crossing is a subdivision of higher-end but not luxury homes in a highly walkable, bikeable neighborhood in Bend’s coveted Westside. In 2022, 78 homes sold in Northwest Crossing for a median of $1,178,000, a 26% year-over-year increase.
Prices dropped very slightly in the second half of 2022, falling to a median of $1,150,000. But these homes still sold for 98.2% of their original list price even though they spent longer on the market, averaging 32 days.
Compare that to Deschutes River Woods, a subdivision featuring more run-of the mill stick-built and some manufactured homes on larger lots on the very edge of southwest Bend.
In 2022, 89 properties sold for a median of $600,000 in DRW, a 14% year-over-year increase. However, in the second half of 2022, 38 properties sold for a median of only $487,500. That would translate to a 8% year-over-year price drop.
These two case studies represent extremes in terms of Bend’s price action. Still, they point toward an important conclusion: demand is still high for homes with high-level finishes in Bend’s most desirable neighborhoods. It’s the more run-of-the-mill homes in less central locations that are languishing on the market and seeing price reductions.
Inventory is still very low in Bend – just 1.9 months as of the end of the year. December’s listing activity was lower than at any point on record, with only 80 new listings.
Builders have definitely hit the pause button while uncertainty about the broader economy sorts itself out. But Bend’s inventory of certain kinds of properties has risen significantly, at least relative to the past couple of years.
We’ll go more into a few of the specifics about Bend’s market futher below. For now, here’s the year in review for Eugene.
2022 in Review for Eugene, Oregon
While prices in Bend began to decline in the early spring of 2022, Eugene’s sale prices spent most the year going up, up, and up, reaching a peak median of $481,000 in September.
7% mortgage rates eventually proved too much for buyers to stomach, though. By December, Eugene’s median sale price had dropped to $438,000, 4% below the figure for the entire year.
Even though Eugene’s market didn’t appreciate as much as Bend’s in 2022, it has fared significantly better through the downturn of the second half of the year.
The main reason? Well, it basically all comes down to inventory levels. Eugene’s are still tremendously low, at just 0.9 months.
But even that number doesn’t tell the entire story. Move-in-ready homes with contemporary finishes in desirable locations are in even shorter supply.
Unlike Bend, Eugene’s deficit of new construction is nothing new. There’s been a shortage of buildable land for the past three decades and counting.
On top of that, 2022 saw a dramatic decrease in new listings. Homeowners are staying put unless they need to make a move, especially if they bought when mortgage rates were low.
The Eugene-area Multiple Listing Service tracks data in a different way from the Bend-area MLS, so we’re unable to pull numbers for specific subdivisions. However, it is possible to compare different sections of town to get a bit more granular view of Eugene’s price action.
First, let’s look at East Eugene, which covers many of the city’s most desirable neighborhoods like Amazon, Southeast Eugene, Laurel Hill Valley, and Fairmount.
In 2022, 369 homes sold in East Eugene for a median of $540,000, a 14% year-over-year increase. These homes sold for 99.9% of list price, going off the market in a median of 7 days.
81 of these homes sold in the fourth quarter for a median of $522,000 or 96.1% of list price. They went off the market in a median of 12 days.
Let’s compare those numbers to the Bethel/Danebo area, representing a large swath of Eugene’s northwest quadrant. The Bethel neighborhood features newer homes than most parts of East Eugene, but it’s commonly seen as one of Eugene’s less desirable places to live.
In 2022, 439 homes sold in Bethel for a median of $358,000, an increase of just 4% year-over-year. In the fourth quarter, 94 of these homes sold for a median of $346,800, spending a median of 16 days on the market.
Basically, we can extrapolate that appreciation in Eugene’s less desirable locations has stalled to a much greater extent than in its most coveted neighborhoods. That’s not a particularly surprising conclusion, but it’s important food for thought if you’re a potential buyer or seller in Eugene.
Our 2023 Bend & Eugene, Oregon Real Estate Forecast
The starting place for our discussion about what’s in store for real estate markets in Bend, Eugene, or anywhere has to be mortgage rates. Higher rates mean less purchasing power and less activity from both buyers and sellers.
Should mortgage rates drop, on the other hand, buyers might jump into the market, eager to take advantage. That includes people who have been wanting to sell their homes to trade up or downsize but haven’t been able to make the numbers work.
It’s hard to find any kind of consensus on what the Federal Reserve is going to do in 2023. Still, rates have actually gone down somewhat already, falling to a nationwide average of 6.15% in the third week of January.
Mortgage applications saw a corresponding 25% week-over-week increase, but they’re still down 35% year-over-year. Of course, anyone looking to take advantage of lower rates in Bend and particularly in Eugene is going to face the same conundrum: inventory is very low right now. But if rates continue to drop somewhat heading into the spring, we may see a bit of a surge of activity locally.
If you’re thinking of selling your home in Bend or Eugene, that means April and May might be the time to strike while the iron’s hot. Uncertainty should continue to reign supreme in 2023 and FOMO (fear of missing out) might rule again briefly if lending conditions take a somewhat more favorable turn.
With that being said, you may have noticed in the infographics above that we’re expecting prices to stay more-or-less flat in both Bend and Eugene.
The preliminary data for January indicates that prices in both cities have stabilized. In Eugene, prices may even be inching back toward the highs we saw in the fall.
The baseline we see for both markets is for prices to remain flat relative to the second half of 2022.
For Eugene, that means we’re expecting median sale prices to hover around $450,000 in 2023.
In Bend, prices probably won’t reach 2022’s median of $730,000. But we do expect sale prices to climb back above $700,000 by the spring.
Mortgage rates, of course, will have an impact on whether Eugene and Bend’s markets trend toward the upside or the downside. But one more factor bears discussion.
There’s a growing consensus that the United States will enter a recession in 2023, and some economists expect unemployment to rise to almost 5%. Job losses are the one thing that could potentially shift the balance of the housing market, forcing some to sell their homes and others to hold off on buying a home.
But inventory is so low right now in Bend in Eugene that it’s unlikely we’ll see a significant shift. One factor keeping housing supply low is the huge influx of transplants we’ve seen over the past several years.
A recent study indicated that Oregon has the nation’s second-highest proportion of inbound to outbound moves, with 67% of moves being inbound.
50% of Oregon’s transplants are between the ages of 18 and 34. That may not seem like a prime home-buying demographic, but the same study indicates that over half of that cohort have annual incomes of over $100,000.
Bend’s market has gotten more and more out of reach for first-time homebuyers, but that’s not the case yet in Eugene. Our conclusion: Eugene’s real estate market is particularly insulated from the potential effects of a recession. That’s less the case in Bend, but at the same time, it’s important not to underestimate how much of a destination Bend has become in the last few years.
In Conclusion: What Bend and Eugene Buyers and Sellers Need to Know in 2023
Like we mentioned above, Bend and Eugene’s markets may see heightened activity in the spring of 2023, particularly if mortgage rates are lower than they were at the tail end of 2022.
If you’re thinking of selling your home, that means April and May may be your best chance to fetch top dollar. It depends, though, on what kind of home you’re trying to sell.
Through the winter months, inventory will drop further in Bend and Eugene. Nonetheless, properties with more run-of-the-mill finishes in less desirable parts of town will accumulate more than they have the past several years. Similarly, flippers will be very hesitant to take on fixer-uppers except at rock-bottom prices.
On the other hand, there are plenty of all-cash investors looking to take advantage of the somewhat cooler market that we have right now. Bidding wars are still possible on the most desirable tpes of investment properties, even if they need a bit of work.
The tricky thing about Bend and Eugene’s markets right now is that it’s still possible to price certain kinds of properties fairly aggressively, while other kinds of properties require the exact opposite approach.
If you (and your agent) aren’t in tune with the micro-dynamics of your particular neighborhood and price point, you risk leaving money on the table or else overshooting and needing to make price reductions while your home sits on the market.
Patience will be important for all Bend and Eugene sellers. Homes are simply spending a lot longer on the market than they did a year or two ago, even in more desirable neighborhoods and subdivisions.
At the same time, if you overprice your home, you may end up wishing you’d accepted what looked like a lowball offer earlier on. The most important thing is to properly calibrate your expectations.
As a buyer, while you may have more leverage than you did a year or two ago – if you can afford today’s mortgage rates or pay in cash, anyway – it’s important to recognize that this leverage only goes so far.
Depending on what you’re looking for, you may need to be very aggressive. On the other hand, you might encounter a seller willing and eager to make whatever concessions they need to make to get their home off the market. It’s completely dependent on the individual property.
Again, uncertainty will rule in 2023. It’s difficult not knowing whether rates might rise further and make it impossible to buy a home.
If the right opportunity comes along, it may be important to seize it. On the other hand, you don’t want to let FOMO dictate your decisions.
We’re likely to see a situation in 2023 where inventory increases in the summer heading into the fall while prices remain relatively flat. That could mean that the home you miss out on in the spring will come up later and potentially with less competition. It’s hard to be definitive, though.
As the year proceeds, we’ll be offering regular updates on our Bend market report page and our Eugene market report page. You can also sign up for monthly email updates by pressing the button to right.
Needless to say, we’re also available to have a discussion and help you interpret how the direction of the market might impact your own decision to purchase or sell a home. We’ve given a very broad overview of our local markets here, but your property and your situation are completely unique. We’re here to help you make sense of it all, so don’t hesitate to reach out!