(Graph courtesy of REMAX Key Properties)
2026 is expected to be the year of balance for Central Oregon’s residential real estate market. Improving affordability, increasing consumer confidence, and normalizing inventory levels are converging to create favorable conditions for both buyers and sellers, with modest price appreciation of 6 percent to 9 percent anticipated.
However, to look forward we must first look back at the conditions that have set the stage for where we are today. Central Oregon’s real estate market is coming out of more than 24 months of stagnate, stuck conditions. Several factors have contributed to slowed appreciation and in some cases, depreciation, of the residential market.
Essentially, we have experienced two markets in the last six years: the COVID Era Boom and the Market Correction.
Historic Factors
The COVID Era Boom (2020-2022)
Many of us know this story very well. The perfect storm of pandemic-driven demand, extremely low mortgage rates, and low inventory created one of the hottest sellers’ markets we have ever seen in Central Oregon. Prices appreciated at double digit rates as buyers competed for scarce homes, fundamentally reshaping Central Oregon’s affordability landscape.
The Market Correction (2022-2025)
After two years of intense price appreciation, several forces combined to apply the breaks on the boom market:
Rising Interest Rates. The Federal Reserve’s aggressive rate increases pushed 30-year fixed mortgages from under 3 percent to over 7 percent within 18 months, dramatically reducing purchasing power.
Affordability Crisis. Rapidly escalating prices combined with higher borrowing costs priced many buyers out of the market entirely.
Economic Uncertainty. Broader economic headwinds, including inflation concerns and consumer confidence fluctuations, further dampened demand.
The Lock-In Effect. Existing homeowners secured in historically low rates (under 4 percent) became reluctant to sell, effectively removing significant inventory from circulation and reducing overall transaction volume by an estimated 30-40 percent.
These factors all led to a gradual shift from an intense seller’s market to a buyer’s market.
Moving On!
We have been working our way through this challenging period, and several positive indicators suggest that the market is finding its footing once again.
There has been downward pressure toward lower 30-year fixed mortgage rates, hovering around 6 percent. At the same time, price appreciation has slowed and in turn is increasing affordability and bringing more buyers to the market.
Another indicator we can look at is mortgage applications. The rate of mortgage applications has jumped 11 percent nationally compared to this time last year. This tells us that consumer confidence is improving, buyers are beginning to seek loan approval and shop for homes, which will likely lead to increased demand.
At the same time, we can see that the number of mortgages held at below a 4 percent interest rate is steadily decreasing nationally. This indicates that homeowners once locked into historically low rates may be coming to terms with the new lending environment and despite having an exceptional mortgage, still need to move on and sell because of life circumstances. If this trend continues, we will see an increase in overall sales volume and market movement.
Moreover, a significant volume of 2025 inventory was removed from the market. According to Flex MLS, 440 properties in Deschutes County were expired, withdrawn or cancelled in the fourth quarter of last year. As these properties may re-enter the market in 2026, they should benefit from substantially improved market conditions and stronger buyer demand.
The bottom line? Increased demand coupled with a healthy inventory will create an active, healthy residential real estate market in 2026. This year will likely be good opportunity for both buyers and sellers to participate in this strengthening market.
