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Central Oregon Market Remains Strong as Influx Continues Despite Rate Hikes
The Central Oregon real estate market has shown remarkable resilience, consistently outperforming the national average despite a rising interest rate environment, as home prices have continued to trend upwards.
The Bend housing market is particularly competitive, with the median sale price hitting a whopping $812,400 in March 2024 — an increase of 21.3% since last year. Data reveals homes for sale in Bend typically receive two offers on average and sell in under 60 days, while the median sale price per square foot rose to $409.
In fast-growing Redmond, the median price was $537,000 while new construction throughout the region is becoming a more prominent factor after a relative slowdown. At the state level, the average price of an Oregon home is about $480,000.
Demand remains strong relative to supply as Central Oregon’s renowned amenities and lifestyle opportunities draw a constant stream of buyers, supporting price points.
The most recent regular report from Redmond’s Beacon Appraisal Group, showed median prices in March for the tri-county area included $732,000 in Sisters, $705,000 in Sunriver, $365,000 in both La Pine and Jefferson County and $418,000 in Crook County,
Appraiser Donnie Montager commented, “Nearly 25% of single-family residential sales in Bend last month were for $1 million and over.
“If we follow the same trend we did last year, in 2023, I’d expect to see the median kind of drop down from this heightened increase.
“Central Oregon has a lot to offer, and I think over the years that’s been the one constant that I would say continues to draw people in.”
He added that the soaring median prices were out of reach for many people, representing a challenge for essential workers critical to the community, such as teachers, nurses, firefighters, and police.
Interest rates continue to hover above 7%, but inventory is so low that some 21% of homes sold above the list price, meaning it could be an opportune time for home sellers to lock in historically high prices.
Forecasts are hopeful mortgage Interest rates will stabilize by the second half of 2024 and easing inflation together with stabilizing rates will bring back house hunters, but experts predict home prices will continue to rise until the low supply-high demand dynamic changes.
Starting in July 2024 (pending final review and federal court approval), home sellers no longer will be responsible for paying both their own agent and the buyer’s agent. Instead, homebuyers who want representation will have to pay their own agents separately, potentially allowing for more room to negotiate commissions.
While experiencing some typical seasonal fluctuations, Bend has seen a notable increase in both the number of homes sold and their corresponding sale prices.
Despite occasional variations in mortgage rates, the region consistently achieves record-high housing prices, with the average sale price in Bend reaching an impressive 98% of the asking price, clearly demonstrating the enduring demand for properties in the area.
Despite experiencing the typical fluctuations of the market, it is a similar story in Redmond, which has seen a remarkable rise in both the quantity of homes sold and their corresponding sale prices.
Steve Redmond, managing principal and co-owner of Windemere Real Estate, with branches in Bend, Redmond, and Sisters, said, “First of all, the reason prices are going up is supply and demand, not real estate commissions.
“I am seeing a trend toward a more balanced market, with more inventory coming to market. I would say, if possible, buy now, refinance later — homebuyers are better off with less competition than lower interest rates. If you find the home you need and want, get it. You can always refi if rates go down.
“Central Oregon continues to be a desirable destination market, and Bend is a long way from the ‘poverty with a view’ label we saw touted in 1996.
“Amenities and lifestyle continue to attract people — incredibly we just hit $1,000 per sq. ft. for a property on Bend’s westside.
“We are certainly seeing more cash buyers, representing some 35% of the market in the first quarter of 2024.
“Buying and selling is becoming increasingly more of an equation. It is a somewhat fluctuating market, but the value proposition of an experienced realtor will remain, and people will continue to benefit from professional representation.”
On the commercial front, Walt Ramage, principal broker with NAI Cascade Commercial Real Estate Services, said, “Specifically, in our region, I’m keeping an eye on development land within the Urban Growth Area.
“There is a lack of development land in Bend, and the majority of developable land inventory is within the areas that are currently being annexed into the city.
“Since the pandemic, Bend has become a ‘Zoom Boom’ town, which has put an even greater demand on housing, light industrial, and commercial services.”
Ramage observed that there had been an uptick recently in Bend’s light industrial vacancy rate, but it was still less than 2%, which is not considered a healthy level of product. Meanwhile, given the soaring land prices and construction costs many small businesses could not afford parcels to build on.
He said the Central Oregon community should be alarmed about the potential scenario regarding limiting medical opportunities for a growing population.
He gave the example of the St. Charles Medical Center district in Bend currently only having four developable parcels.
He said, “If a medical professional wanted to build for their practice and own the real estate, initially developable land is hard to find, and even if you do, the proposition is expensive.
“This is going to be exasperated by the City of Bend’s plan to significantly increase Systems Development Charges (fees to developers for the costs of water, transportation, and sewer infrastructure).
“Under the new methodology, for example, the transportation SDC fee for some commercial construction would go from $15,000 per 1,000 sq. ft. to $39,382 per 1,000 sq. ft. — a 262% increase!
“It seems the City is playing catch up regarding infrastructure, and the costs of past elected officials’ bad decisions will be put back on the private sector.
“If, say, you wanted to build a 7,000-square-foot medical building, the hard and soft costs involved, including increased SDC’s, would translate to the equivalent of around $5 per sq. ft. per month in rent. This is challenging at a time when we need more medical services, in light of a growing and ageing population.”
A public meeting on the SDCs proposal will be held May 1, with the adoption of an increase set for July 1, though officials indicated they may be phased in.
Ramage added, “The lack of developable land, the extended time periods to build, interest cost of debt, and inflationary pressures all add to the equation. Kudos to the private sector for being resilient, though higher costs inevitably get passed on to the consumer.
“And kudos too to the local banking community for finding ways to creatively get deals done.”
Dan Kemp, CCIM, partner and principal broker with Compass Commercial, who authors the quarterly Points newsletter, said, “Bend consistently demonstrates its resilience amid challenges faced by other commercial markets nationwide.
“While the commercial real estate market in Bend has exhibited a slight deceleration from the vigorous pace of the last three years trends are indicative of a constructive transition towards a balanced market.”
Regarding the office sector, remote work in the post-COVID world has experienced significant growth, with 12.7 % of full-time employees opting to work from home and an additional 28.8% embracing a hybrid work model, as reported by Forbes. Projections indicate that 32.6 million Americans will be working from home by 2025.
Kemp said, “This shift is a key factor contributing to the national average office vacancy rate rising to 13.6%. While the broader office market is facing increased vacancy rates Bend has demonstrated a more resilient stance
“In 2023 there was a modest 1.72% increase in vacancy, resulting in an overall office vacancy rate of 5.66% — less than half of the national average. We anticipate the Bend office market will maintain its relative stability this year.
“The retail sector demonstrated robust performance throughout 2023, and this positive trend should persist in 2024. Given the limited inventory coupled with sustained strong demand, the retail sector is well positioned for success throughout this year.”
The industrial sector has witnessed a parallel narrative on both local and national scales. Despite a substantial increase in inventory, demand has consistently outpaced supply. In 2022 vacancy rates plummeted to less than 0.5%, indicating an unbalanced market condition.
In 2023, efforts to replenish inventory saw modest improvement, with year end rates standing at 1.99%. However, that figure remained below the threshold for a healthy market.
Over the last two years investment real estate, particularly the multifamily sector, has experienced a downturn due to rapidly rising interest rates and construction and land costs. Nationwide, real estate firm CBRE predicts a 5%-15% decline in values.
In Bend, robust multifamily construction activity over the last decade has doubled the inventory, leading to a 9.4% vacancy rate in the last quarter of 2023. Scheduled deliveries are expected to expand inventory by an additional 9.8%, contributing to a softening market throughout 2024, with vacancy rates projected to decrease starting in 2025.
Kemp concluded, “Bend’s commercial real estate market displays resilience amid national challenges. Despite a minor deceleration, the office market remains strong compared to the national average.
“The retail sector is well-positioned for success with limited inventory, while the industrial sector faces consistent demand. The multifamily sector experiences a softening in 2024, yet Bend’s overall outlook is positive.”
