There are lots of factors at play on the demand side. When the world was introduced to COVID-19 it seemed somewhat intuitive that inventory would be constrained. With people concerned about a pandemic, most would likely choose to stay put and to not bring strangers through their homes. As summer approached more people wanted out of a rental and into something of their own. This coupled with work from home allowed people who were tied to cities/regions for their jobs to leave. People escaping metros seemed to prefer more "lifestyle" oriented towns and cities. Even prior to COVID, Bend had always been a popular place for remote workers, so this shift really impacted our local market.
The other big factor is that most millennials (born 1981-1996) have now reached the age of homeownership. Not only that, but many millennials have opted to wait 'til later in life to purchase a home. Part of this is due to the recession that set many millennials back and scared a number away from the housing market. Now you have a glut of older millennials who stayed out of the housing market suddenly competing in a very constrained market. Now it seems a soaring housing market is impacting younger millennials and those who had stayed out of the housing market for any number of reasons. I was speaking with a friend of mine who is a lender, and they suggested that if you cut the demand for Central Oregon in half, we would still be in a very competitive market at all price points, but especially entry level (I won't even mention prices, as they are far from "entry level"). The thing is, it is not just a local phenomenon; literally everywhere across the nation feels like "the hottest real estate market in the country." Sure, there are less competitive markets than Bend/Redmond, but relatively speaking, demand is high everywhere and inventory remains low.
The supply side is complicated, too. The recession set back housing supply that was already significantly behind, and this issue has truly been magnified in the last few years. One of the major events of the pandemic was the lowering of interest rates, and many people took the opportunity to refinance their homes to historic rock-bottom rates. These refinances allowed homeowners to reduce their monthly payments, which then allowed them to save some money in their monthly budget. As prices surged, homeowners had access to equity that allowed them to pull cash out of their homes to pay off debt, pay for education or perhaps purchase another property.