Central Oregon Housing Market: A Double-Edged Sword

Life in the Central Oregon real estate market is a double-edged sword this summer.
On one hand, for first-time buyers with good credit and some savings, life is good. There are plenty of homes to look at and plenty of sellers willing to cut a deal.

For sellers, though, the laws of supply and demand could be conjuring little more than gloom.

Overloaded with unsold homes and underloaded with Oregon mortgage borrowers, July median sales prices in all four of Central Oregon’s largest home markets dropped below July 2006 levels, while the overall number of sales for the month fell to the lowest level in at least five years.

Some market watchers are hoping the Federal Reserve will move to inject more cash into the nation’s badly knotted credit markets — a factor that could tend to push mortgage interest rates down and open the affordability window a little wider without deeper price cuts.

In the meantime, though, things have gotten to the point in the local markets, especially for home builders on recently purchased land, where prices can’t sink much further without inviting losses, Redmond-based Century 21 Gold Country agent Pam Lester said.

“I don’t expect prices to go anywhere but up from here,” Lester said, “because they can’t go any lower.”

In Bend, 109 single-family homes on less than an acre of land sold in July, down 27.8 percent from June’s sales, according to the Central Oregon Multiple Listing Service. The median price — the price at which half sold for more and half for less — stood at $340,000, 4.5 percent less than the median price of homes sold in July 2006.

Monthly sales figures in Redmond, Crook County and Jefferson County also fell to their lowest levels in five years, according to the MLS, while median sale prices dipped below prices in the same month a year ago.

In Redmond, 40 non-acreage homes sold in July, down 45.2 percent from July 2006. Median prices also slipped to $247,000, down 5.7 percent from the same month last year.

In Crook County, 11 homes sold — half of the July 2006 number — while median sales prices slid to $190,000, off 13.5 percent from homes sold in July 2006.

In Jefferson County, eight homes sold — a third of the July 2006 volume — while median sales prices dipped 4.9 percent from July 2006 to $173,250.

Median prices in all four regions remained solidly above July 2005 levels. But persistently high levels of unsold homes indicate that the market’s hangover from the boom — which was fed by cheap mortgage loans and high levels of speculative buying before it ended in June 2006 — is far from over.

In Bend, the inventory bulge is at its worst in the $400,000-and-under price range, which accounts for more than 68 percent of the homes for sale, according to Bratton’s graphs. It’s no accident that that’s the price range most production builders build in, and the price range that attracted the heaviest interest from speculators and investors during the boom years, Lester said.

The builders have cut way back on the pace of construction, taking out 56 percent fewer building permits in all of Central Oregon through the first seven months of this year than they did during the same period a year ago, according to Don Patton, president of Cascade Central Business Consultants, who tracks the industry on a monthly basis.

But some of the speculators who tried to flee these housing markets beginning in June 2006 when it showed the first signs of weakness, are still trying to sell homes, although many in Redmond have given up and rented them out, Century 21’s Lester said.

SOURCE: The Bend Bulletin