Full disclosure, I totally believe the title of this article. If we’re in a bubble, there’s no way it can continue much longer. By definition, something is a bubble for several reasons, but two are that it’s thin and can pop. But I also don’t know if we’re in a bubble. Yes, history has shown that economics works in cycles, and yes, eventually something will happen that, at the very least, will slow our economy.
All that said, our Team has been in Central Oregon for 20 years. We’ve helped thousands buy & sell in the area, and we’ve seen both ups & downs along the way. Here are our thoughts…
Some main market problems, as we see them…
- Every Realtor in the country is beating the same drum, “Prices are high. If you’re not selling, you’re missing out.” In reality, this doesn’t make a lot of sense. The only way to “not miss out” is to find another affordable place to live locally, move out of state, or pocket the cash and not buy. Those options are either quite hard, not possible, or end in homelessness – and that’s a terrible option. If you can’t realistically access the equity in your home and still have a place to live, you aren’t missing out… you’re just not selling in a seller’s market. Nothing more, nothing less.
- If you sell now and buy locally… are you selling high, but then also buying high? Yep, you are. It’s possible to sell a very high demand property for far above market value and then buy something that is not in as high demand for a more reasonable price (a good agent can guide you through that), but that’s the perfect storm. This is not likely for most of us. You would have to be okay with a significant change in your living situation, whether it’s a totally different type of home, location, or whatever. But clearly trading a bidding war on your home, to go into a bidding war to buy a home – in a lateral move – doesn’t make a lot of sense.
- Most opinions of the real estate market are driven these days either by agents trying to make money or a fearful public remembering what happened in 2007. To agents, I say just be honest and hardworking, not misleading. To the public, I say being conservative is always the best way to limit your risk and, if that sounds like what you want, then stay right where you are. To the rest of you willing to listen to another opinion, here is where I think we’re going…
What is going to happen this year and the next?
- This year will be a lot of the same. Unless some major unforeseen event hits the nation, we will see a tight market full of high selling prices and frustrated buyers. Low Inventory is our issue. And, no, that does not mean the number of homes to sell is low – it means that, compared to high buyer demand, the number of homes to sell is low. And whether you like it or not, the demand is not going anywhere too quickly. Bend was a well kept secret years ago, but it’s not anymore. The pull towards Bend is not led by industry or anything else man-made, but by the beauty that surrounds us and the dream of a certain quality of life, potentially better than what someone may currently be experiencing.
- Years to come will bring a slow movement towards a more stable market – emphasis on the “slow”. It is far more common in our country that, when a recession hits, it slows appreciation, not forces depreciation. I anticipate that some type of recession will hit (duh, it always does) but that does not necessarily mean dropping prices. Far more often it means prices will begin to level off and appreciation will slow.
What will bring about this “leveling off”?
- Fewer buyers will be able to afford our homes and take themselves out of the market, therefore slightly decreasing demand. Not a great thing for locals, in fact, it sucks, but it’s the hard truth. This is already a reality for many, specifically those needing to use a government backed loan or those renting but looking to own their first home. Not always, but generally those folks have smaller down payments and less “stability” in the eyes of lenders and sellers and therefore can’t compete with more “stable” buyers with larger down payments, conventional loans and, in some cases, all-cash offers.
- Interest rate increases will slow demand. This will also pull demand down a bit. If rates go up, people will be able to afford less and will be forced to buy outside of Bend and potentially outside of Central Oregon. Again, that sucks for a lot of people. It may prevent a member of my own family from moving here soon, but it is another hard truth.
- Some locals will decide it’s time to move on and boost supply. I’m not foreseeing some mass exodus, but eventually more and more locals will decide to move on from Central Oregon or at least go from the more populated areas to the less populated. I have seen locals start this pattern already based on congestion, politics, and/or money. Over the next few years, many locals will decide to move on to what they see as greener pastures, and that will provide a bit more supply to our market.
- The release of more buildable land will slowly boost supply. As is always the case, more land will be deemed buildable as we grow. That said, so much of our area should not ever be built on because it would be wrong and we would cut too deep into the beauty around us. However, development is an inevitable occurrence as areas grow. I personally hope this is done slowly and intelligently so we can keep what makes our home one of the best areas of the country. And, of course, more buildable land means more homes and more inventory.
None of these predictions are groundbreaking, but after watching, reading, and listening to many – we feel like we’ll spike up and then ease down towards a more stable market as we go through the next few years. Small changes to the market will lead to a leveling out and return us to a healthier and more stable market.
In conclusion, we have and always will preach that each homeowner, or soon to be homeowner, should do what’s best for them and their families when it comes to buying and selling. I know, that shouldn’t even need to be said, but it’s the truth for us. Selling now may or may not be the right thing for you. Buying now may or may not be the right thing for you. But, from a team that has been here for a long time and plans to be here for a long time more, we will gladly speak with you about your individual needs and wants and give you an honest opinion. We’re a phone call or email away and here to assist and advise first.