My first indication this was not the busted up real estate market of recent years happened in May on the corner of 10th Street and Portland Avenue, near the epicenter of the 2006/2007 boom.
I was ready to make an offer on a dump of a house. But because it was in that great location, I was willing to spend the summer replacing turquoise toilets, pink bathtubs and carpets reeking of cats—plus it seemed like a steal.The house was bank-owned and asking price was $150,000.
I told my real estate agent we should go in at $145,000 and just let them tell a willing buyer no.
But what happened in the next days and weeks, as I tried to elbow out cash investors and ridiculously high bidders to get a reasonably priced house, shattered all my preconceived notions about real estate in Central Oregon.
In short, this market is turning, according to real estate experts, realtors and just about every measure of data kept on home sales in Deschutes County.
One of the most significant indications of this: the median home price in Deschutes County jumped $30,000 between April and May of this year, according to the Multiple Listing Service of Central Oregon. That is the single largest month over month increase since May of 2007—the very height of the boom, according to MLS data.
People are also snapping up houses at such a clip there’s almost nothing available under $250,000, at least when compared with MLS data from the past few years.
And according to insiders, investors are active in the market, with aggressive players flipping houses again.
As for that home on 10th Street and Portland Avenue. A gal at the bank told my real estate agent not to even bother with my piddly offer. They were getting bids in the neighborhood of $225,000—$75,000 over listing price. For a dump.
NOWHERE TO GO BUT UP
What’s happening, say real estate experts, is that the bust drove prices down so far—about 60 percent from the peak in 2007—that we are now experiencing a “mini-boom” as investors scramble to get back into a market they believe will not lose any more ground.
“People are perceiving that it’s hit bottom and is coming back up,” said Gerard Mildner, the director of the Portland State University Center for Real Estate. “The shock of the recession really affected [buyers] tremendously. That psychology has changed.”
Though housing prices have twitched up and down each month for years (see our graph on this page), they finally appear to have scraped bottom in the winter of 2010/2011 with average home prices in Deschutes County in the neighborhood of $188,000.
Since then, prices have been incrementally bumping up. And, now, in the last two months, they’ve climbed fast.
In May, the average price of a home sale in Deschutes County was $236,000, up from $219,000 in April. In June, the average home sales price was $238,000. We haven’t seen consistent home sales numbers that high in two a half years.
Note that an average price is slightly different from a median price. An average tells the story of the general trend of a set of data. A median, which we referenced higher up in this story, describes the exact midway point between all sale prices above and below the median number. No matter how you slice it, houses are getting more expensive.
“It’s really been picking up,” said Jaynee Beck, who has been a realtor in Central Oregon for 20 years and is currently the president of Central Oregon Realtors Association. “I would say we are seeing a mini-boom.”
It’s not just Bend and it’s not just the summer buying season, either.
One of the major home price indices in the United States, the Standard and Poor’s Case –Shiller Home Price Indices, reported that in April home sales prices rose in 19 of the 20 major US markets it monitors.
And they adjusted that data to account for the seasonal bump in sales prices.
BUYERS WANT BACK IN THE GAME
Basically, people have been “sitting on the sidelines,” as Beck put it, waiting for the moment when they won’t lose the value of their down payment in a falling market.
“We’ve got a lot of pent up buyers right now,” said Beck.
Now, those buyers are afraid that if they don’t get in the game, they’ll miss their chance to snatch up the near rock bottom deals and get in on the record low interest rates available today.
That means for every home on the market, there are a lot more interested buyers than in recent years. That means more bids on every house. And that means bidding wars are becoming the norm, especially on the westside where demand still far outstrips supply.
“People are getting outbid by huge amounts," said Beck. "One house recently—the house got 31 offers on it within the first week of being listed. It sold for [more than] $20,000 over listing price.”
The buyers returning to the Bend market are mostly familiar faces, said Beck.
There are still the standard first-time homebuyers looking to get into a home for the long haul.
But particularly indicative of the action happening now is people wanting to retire from California or other more expensive markets are back.
They are buying their retirement and vacation homes and, just like before, driving prices, said Beck.
And then there are the investors. These folks are looking to scoop up the deals, fix up the houses and sell them later for a higher price.
“People are starting to remodel and flip them again,” said Beck.
In February, one of her clients noticed a particular house listed for $210,000. In April, it sold for $225,000. Now it’s back on the market for $249,000 with upgrades.
“And people are actually able to pull it off right now because of our lack of inventory,” said Beck.
High demand, low supply equals…
Inventory is one of those key indicators in any real estate market. In general, inventory has to do with levels of buying.
The term means that at the rate houses are being purchased, it will take x amount of time to run out of the houses currently available on the market.
Normal is around six months, but in the Bend area, we have less than two months of inventory for houses under $250,000 on average, according to data from the Multiple Listing Service of Central Oregon.
“And that is driving prices up, of course,” said Wendy Adkisson, the managing principal broker at Cascade Sotheby’s, who has been a Realtor for 27 years.
She was here before the boom, through those big years and has watched the market sink to the dismal prices of 2010 and 2011.
In her lead role at the agency, she reviews every sale file. Starting in December, she started noticing changes.
“It’s funny, because I am watching these files come through and my gut is telling me these things are going up,” she said.
Then spring comes around and the numbers start going up drastically and she realized “Yeah, this is really going up. It’s finally happening, thank God.”
The lack of inventory problem is driving prices up in other areas of the state, too. Portland, in particular, is reporting inventories in the four-month range, according to The Oregonian, leading to a price jump there, too.
The big question is whether this current trend will last and if it’s an indication of a broader market recovery.
Eventually, sellers will become confident they can get a decent price for their home and more houses will come on the market. Homebuilders, who are already starting to ramp up building, will help to satisfy the demand, too.
All that will spread out buyers over more available houses, decreasing bidding war pressures and ultimately stabilizing prices.
Adkisson predicted this process will likely take about a year with prices continuing to bump up through the winter and next spring.
“This will work itself out,” said Adkisson. “And we’ll start getting a natural appreciation like what we used to have before the bubble hit. There is a natural tipping point.”
For myself, I finally did snag a house, but only after beating out a dozen other interested parties and, in one fit of mania, bidding $26,000 over listing price on another place. The only question now—to flip or not to flip.