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February Housing Market

There are signs that market conditions will be improving.

Mortgage rates averaging 6.61 % for a 30-year fixed mortgage

The Federal Open Market Committee (FOMC) announced on January 31, 2024, that it would maintain its policy rate in a range of 5.25% to 5.5%. The January decision marks the fourth straight meeting at which the Federal Reserve (Fed) has opted to hold interest rates steady.

But first let’s start with our local Market  and what we have seen happening here at home.

Bend 97701 Median list price $720k with the market action index hovering around 41. This is an increase over last month's market action index of 36. Inventory has decreased to 57, but expect to see this number rise all over Central Oregon the closer we get to spring. The average days on Market at 133 and 21% have reduced the sales price

97702 Median list price $824k with the market action index hovering around 38. Same as last months 38. Inventory has decreased to 116, average days on Market at 93 and 25% have reduced the sales price

97703 Median list price $1,595,000 with the market action index hovering around 38 more than last month 35.  Inventory has decreased to 78, average days on Market at 132 and 24% have reduced the sales price.

 

Bend’s south end – Oregon Water Wonderland area 97707: median list price was $900k  market action index 33 up from than  last months 31. inventory decreased to 37 listed homes with average 106 days on the market and 24% decreasing prices

 

La Pine: Median list price was $550k with a market action index 38. Up froms last months 36.  inventory decreased to 59 listed homes with average 129 days on the market and 20% decreasing prices

 

Prineville: Median list price was $499k Market Action Index at 32 up from last months 30, inventory decreased to 76 listed homes with average 143 days on the market and 25% decreasing prices

 

Redmond: Median list price was $600k with the Market Action Index at 37 an increase from last month 36, inventory decreased to 149 listed homes with average 112 days on the market and 28% decreasing prices

 

Sisters: median list price was $880,000 with the Market Action Index at 35 which is same as last month, inventory decreased to 39 listed homes with average 130 days on the market and 26% decreasing prices

 

Madras: median list price was $465k with the Market Action Index at 31 this is less than last months 33, inventory decreased 37 listed homes with average 96 days on the market and 41% decreasing prices


As I was saying earlier - There are signs that housing market conditions could be improving. The current rate for a 30-year fixed-rate mortgage is 6.63%, down by 0.06 percentage points over the past week. Last year, the 30-year rate averaged 6.09%,

· Low levels of inventory mean that sellers continue to have the upper hand in the housing market.

·Mortgage rates have come down from their peak but are still higher than over the last 5 years, and steep home prices are dissuading some would-be buyers.

With home prices historically high and inventory still very tight, many prospective sellers and hopeful buyers are feeling nervous about today’s housing market, but there are opportunities for homebuyers in todays market.

· Federal Reserve Chair Jerome Powell vowed in a “60 Minutes” interview aired Sunday that the central bank will proceed carefully with interest rate cuts this year.

· “We just want some more confidence before we take that very important step of beginning to cut interest rates,” he said.

· Powell warned that the monetary policy tightening would cause “some pain.” However, “it really hasn’t happened,” he added

·  In a wide-ranging interview with “60 Minutes” after last week’s Federal Open Market Committee meeting, Powell expressed confidence in the economy, promised he wouldn’t be swayed by this year’s presidential election, and said the pain he feared from rate hikes never really materialized.

· “With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully,” he told the news magazine’s Scott Pelley, according to a transcript CBS released.

· “We want to see more evidence that inflation is moving sustainably down to 2%,” Powell added. “Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”

· It’s unlikely the FOMC will make that first move in March, which futures markets had been anticipating.

· The meeting concluded with the committee holding its benchmark borrowing rate in a range between 5.25%-5.5%. In its post-meeting statement, the committee said it would not be cutting “until it has gained greater confidence that inflation is moving” to the 2% target.

· “We’ll update [the outlook] at the March meeting. I will say, though, nothing has happened in the meantime that would lead me to think that people would dramatically change their forecasts,” he said, noting that “the time is coming” for cuts but perhaps not yet.

With rates roughly doubling since 2022, thanks in part to the Federal Reserve’s war on inflation, they have stayed relatively high for the last year and half. While the Fed does not directly set mortgage rates, mortgage lenders take cues from them, and mortgage rates climbed in tandem with the Fed’s long string of rate hikes.

As long as the economy continues to motor along, the new normal of higher rates is here for a while.

 

The Fed signaled in its December meeting that its war on inflation could end soon, but many predict that buyers will still be feeling the squeeze well into 2024.  A sharp economic slowdown would bring mortgage rates  lower — but we are going into an election year and historically the party in power normally works to create a stable economy with affordability.  So it will be interesting to see what happens over all.  

 

Here are some Key housing market stats

  • The median home-sale price was up 4 percent from one year ago, according to NAR data, which was about the same as the rate of inflation.

  • Central Oregon had on average a 3.5-month supply of housing inventory as of which is low enough to be considered a seller’s market.

  • The average rate on a 30-year mortgage was 6.63 percent which is predicted to stay pretty much the same according to the FEDS through their March 2024 meeting.

  •  The Fed’s stated goal of the rate of inflation was 2 percent, and they recently reported that this is where we are, but they want to give it more time to make sure we don’t have any dramatic increase..

Will housing sales decline?

While home prices have more than held firm this year, the volume of home sales has softened considerably. Existing-home sales declined for five months in a row which represents a 7.3 percent drop year-over-year. Since we are not expecting interest rates to change much for the next 6 months, and will most likely remain above 6 percent there won’t be a lot of change to the housing market in the foreseeable future.

There are simply not enough homes for sale. For inventory levels to improve significantly, there would need to be either a surge of homeowners listing their existing properties or a huge amount of new-construction homes hitting the market. While both seem relatively unlikely, we may see some increase in housing inventory for 2024. There will be more home construction, and more existing homeowners then may be willing to sell and give up their low mortgage rates.

Will home prices go down?

So will home prices drop in 2024? Probably not. Home prices will most likely stay slightly under our historically 5-8% annual increase to around 3 to 4 percent, Home price appreciation can only moderate from improved supply. A 20-30 percent rise in home construction could be absorbed into our Central Oregon marketplace, with a continued drop in mortgage rates. Though many of our smaller builders are not willing to risk building a lot of spec homes this year.  These Spec homes will be coming more and more from track home builders.  

Prices are intricately connected with housing inventory. Sellers are likely to remain reluctant to give up their low interest rate for a much higher one, so inventory will remain tight for existing homes. As time passes, more homeowners may be ‘forced’ to sell due to life events, so inventory may rise from the current levels, but it’s unlikely to increase much. That means that prices are unlikely to fall on a year-over-year basis, unless demand falters.

In today’s market, tight inventory gives sellers the upper hand. There are more buyers than there are homes available, so each home that comes on the market becomes more of a hot commodity than it might if there were more options to choose from. Without a significant uptick in inventory, the seller’s market seems unlikely to change next year.

The current significant shortage of inventory suggests it would be unlikely to be a buyer’s market anytime soon.

Given expectations about interest rates and supply, demand will probably exceed supply similar to current this past year.  Sellers may still find themselves making concessions on closing costs or rate buydowns in 2024 to get their homes under contract, and buyers should be wary of biting off more than can be financially chewed. Make sure you understand what your monthly payment will be and understand the type of mortgage you are agreeing to. Will your rate rise or will your monthly payment go up over several years, these are all things to make sure you are aware of when shopping for a home. Home prices are at record highs in most markets, due to increased mortgage rates and increased insurance costs. There are not as many bargains out there as you would expect so make sure you have the mindset to be willing to walk if payments are too much of a stretch

Fed Funds Rate "Likely at Its Peak"

After a period of aggressive rate hikes that began in March 2022, the Fed once again left their benchmark Federal Funds Rate unchanged the end of January at a range of 5.25% to 5.5%. This decision was unanimous and marked the fourth straight meeting where the Fed paused additional hikes.

The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. The Fed's eleven hikes between March 2022 and July 2023 were made to slow the economy and curb the runaway inflation seen over the last few years.

 

What's the bottom line?

The Fed said they believe they have reached their peak Fed Funds Rate for this cycle. However, members don't expect to begin cutting rates until they have "gained greater confidence that inflation is moving sustainably toward 2 percent." Note that the Fed's favored measure, Core Personal Consumption Expenditures, declined to 2.9% annually as of the latest report for December. During his press conference, Fed Chair Jerome Powell acknowledged that inflation data has been favorable over the last six months. However, he does not think the Fed will be ready to start cutting rates at their next meeting on March 20, explaining that members want to see "more good data." 

The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenge. But rates cooled a bit at the end of 2023 — if that continues in 2024, as some experts predict, then market activity should heat up in response.  Some are saying this heat up will last at least until September 2024

The complexities of the current conditions mean that, now more than ever, it’s smart to lean on the guidance of professional broker and Powell Team is just that, we are here to help you navigate and guide you through this market.  Feel free to call text or email and we will do our BEST for you.

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