Steady as she goes for the Central Oregon real estate market.
Steady as she goes seems to be the theme of the Central Oregon real estate market this winter. We aren’t seeing any major moves in home prices or inventory but uncertainty with mortgage interest rates could factor into the market equation over the next couple months.
This month the Federal Reserve began cutting back the number of bonds it has been buying. Those bond purchases were designed to keep interest rates low and stimulate growth in the economy. As you might imagine, the “tapering” of bond purchases has caused the 30-year fixed rate mortgage to climb to 4.5% from 3.35% just eight months ago. Although mortgage interest rates are still at historically low levels, 4.5% could be some sort of psychological barrier for many home buyers after seeing 30-year rates below 4% for much of the past two years.
We could already be seeing the effects of this psychological barrier reflected in the number of homes sold in December. Sales for December 2013 were down 11 percent from December 2012. If this becomes a trend and year over year home sales continue to fall, we could see home prices suffer unless buyers begin to accept the thought that interest rates won’t be back below 4 percent any time soon.
Home prices in Bend and Central Oregon have been very steady for the last seven months. The average price per square foot for Bend was up one dollar from November to $165/sqft. In Deschutes County that number was down $3/sqft to $154 in December.
While home buyers in Bend may not be excited about the prospect of interest rates continuing to rise they will be glad to know that there are more homes to choose from. Despite a seasonal decline in the number of homes for sale, inventory numbers this winter are about 20% better than they were last year.
*Sales data courtesy of Central Oregon MLS