Cold Weather Put A Chill In April Home Sales....Or Did It?

Colder-than-average temperatures last month put a damper on annual garden blooms in Central Oregon.  And at first glance, the chilly weather seems to have affected the pace of local home sales as well.  

Data from the MLS of Central Oregon shows 133 homes on less than one acre of land were sold in April, down from 156 a year earlier. But was the weather the actual reason sales declined nearly 15%?

Another factor to consider is that the inventory of homes for sale is down about 25% from a year earlier.  With more than 200 fewer houses on the market, the absorption rate went from about 19.4% a year ago to about 25% last month.  In other words, while there was about 5 months worth of available housing inventory at this time last year, today there is only about 4 months.

My guess is that the weather won't be the only thing warming up; watch for price stability and, dare I say, maybe even price increases in some market segments, this summer!

Home Sales Up Over 9% In Bend

Sales of stick-built houses on less than an acre were up more than 9% in Bend over the first three months of the year compared to a year earlier.

394 houses were reported sold to the MLS of Central Oregon in the first quarter.  This is an  increase of 33 from 2010.

The median price per square foot paid over the first 3 months of the year was $97.61, down from $102.04 from the same period a year ago.  March saw a slight uptick in the price paid per square foot however, to $98.75/sf.

What Do Cash Sales Say About The Market?

A blog I follow by Seth Godin recently had a post in which he asks

"Is something important because you measure it, or is it measured because it's important?"  (click here to read Mr. Godin's blog)

The timing of his post was ironic since I've just begun tracking the number of houses in Bend selling for all cash.  So is measuring cash sales and the percentage of the market they represent important?

My thought on breaking out the cash sales is that it would seem to indicate two things:

1. the ease or difficulty with which buyers are able to obtain purchase money loans and,
2. the level of interest among investors for buying properties in Bend.

And comparing the results by quarter over the last several years shows a big change.

For instance, in the 2nd quarter of 2007, near the peak of the market, just 8% of sales were for all cash.  Contrast that with the first three months of 2010, when getting a loan was much more difficult; more than 1 in every 4 sales in the 1st quarter of last year was made to a buyer paying all cash (26.3%).

The percentage of deals being made by investors is more difficult to measure but my gut, and my own business experiences, seem to indicate that investors are taking advantage of today's prices, especially at the lower end of the market.

Take for example a $150,000 house with 3 bedrooms, 2.5 baths and 1767 square feet (the median size for a house at this price over the last 3 months).  Figuring a net annual rental income of $10,500 ($1150 monthly rent less yearly taxes of $2800 and insurance of $500) yields an annual return of 7%, a great return in today's low interest rate environment.

However the cash buyer segment of the market breaks down (cash investors versus home buyers unable to qualify for a mortgage loan), the increase as a percentage of the overall market shows that more people are convinced that now is the time to buy real estate in the Bend area.

Let me know what you think the growth in cash sales indicates in the comments section below.
 

Cash Sales Account For Nearly 1 In 3 Home Sales In Bend

The MLS of Central Oregon now provides data on the financing terms used for all closed sales, thanks to the efforts of yours truly.  I had requested this search feature be added because of a perceived increase in all cash sales.  And those perceptions proved true in February, though not necessarily by as much as I'd expected.

36 of the 111 sales of stick built houses on less than an acre in Bend last month were bought for all cash.  I would think 32% of the total sales selling for cash would represent a big increase from a year ago.  But data in the MLS shows that 30 of the 111 sold in February a year ago were also purchased with all cash (27%).  Nevertheless, the additional 6 cash sales does represent a 20% increase from 2010.

I'll make it a point to regularly track cash sales and share the results here with you.  Let me know if there are any other trends you'd be interested in and I'll try to provide them to you.

Does The Bend Housing Market Now Favor Sellers?

The sales pace in February for single family homes on less than an acre would seem to indicate that sellers are now calling the shots in the Bend housing market.

There were 109 houses sold in February in Bend and 414 finished homes are currently listed for sale, resulting in less than 3.8 months of available inventory.  A market has typically been considered  "balanced," favoring neither buyers nor sellers, when there are about 6 months of inventory available.  But with so many distressed properties and a double digit unemployment rate, how can this be true in Bend today?

One explanation I have is that banks are being very careful in controlling the number of foreclosed homes they list for sale in an effort to avoid flooding the market and driving prices even lower.  And a quick analysis seems to bear that out.

As I write this, only 46 of the 414 currently active single family home listings in Bend are shown to be foreclosures.  That's 11.1% of the market.  But similar bank-owned properties accounted for 43% of homes sold last month!

So while only about 1 in 10 houses for sale in Bend are foreclosures, more than 4 of every 10 sold are bank-owned.  Can and will this trend continue?  Let me know your thoughts by replying in the comments section below.

Bend Housing Affordability Reaches Record High

The 4th quarter of 2010 marked the most affordable time period for buying a home in the Bend region since the area was first included as a Metropolitan Statistical Area (MSA) at the beginning of 2006, according to an index released quarterly by the National Association of Home Builders and Wells Fargo.

The Housing Opportunity Index (HOI) showed that 78.2% of new and existing houses sold in the Bend area in the last quarter of 2010 were affordable to families earning the median income of $63,200.  It marked just the third time (and 3rd straight quarter) that the index was above 70%. 

Prior to the first quarter of 2009, the affordability index had never reached higher that 40.1% locally, and hit an all time low of 14.7% in Q1 2007, when the median sale price was $310,000, according to data from the association.

The Bend area was ranked the 133 most affordable MSA in the 4th quarter, out of 223 nationally.  This is by far the highest ranking for our area since being designated as a MSA in 2006.  To put this in perspective, we were ranked 199, 209, 211 and 207 in 2008, and never higher than 140, way back in the first quarter of 2006.

With interest rates on mortgage loans trending upward, now really is a fantastic time to buy a home.  Call me today to get started!

Foreclosures Drag Bend Home Prices Lower

The median price per square foot paid in Bend last year for stick built houses on less than one acre was $104.66.   But this figure differs dramatically depending on the type of sale.

While the overall median price per square foot paid in 2010 was down 6.6% from a year earlier, the price per square foot for all "traditional" sales (not a foreclosure or short sale) decreased by less than half that, down just 3% from 2009.

And short sales, besides seeing a jump of more than 20% in the number of successful deals last year, had a 6.2% lower median price per square foot than those from a year earlier.

So where does this leave foreclosures?  The median price per square foot paid for "bank owned" properties plunged 11.1% last year.  At $87.32 per square foot, foreclosed houses sold for a whopping 30.9% discount from traditional sales!

While I'll agree that there is more perceived risk in buying a foreclosure (seller's are exempt from disclosing to a buyer any defects affecting the property, for example) and that many need at least minor repairs (paint and carpet, etc.), a discount of 31% seems a bit extreme.

As a result, and as many buyers and investors are discovering, foreclosures are providing some truly fantastic buys, even in today's choppy market.

Let me know your thoughts by posting your comments below.