As our local market slowly transitions from a seller's market to a buyer's market in several segments, making your home stand out becomes more important than the last couple years when low
The Perfect Storm For Homebuyers
The Perfect Storm for Homebuyers 3/31/2018
There’s a storm on the horizon. Off in the distance, a real estate squall is brewing. It’s a way off still but many of us can see it coming. I don’t know about you, but my parents taught me well enough to prepare for rainy days and to get out of the rain when it comes. I’m sure yours did too. What’s blowing in? … A combination of higher interest rates, low housing inventory, and an influx of out of state folks moving into Central Oregon with plenty of cash in their pockets. All these factors are coming together in what I can only describe as a perfect storm that will limit your buying power significantly over the next year or so. Let me explain…
We’ve all heard the recent news that the Feds have raised interest rates recently and plan on continuing the increases over the next year. Of course these rate hikes will soon impact mortgage rates and money for a house will cost you that much more. Right now, a $300,000 mortgage with a current rate of 4% will cost you about $1432 per month in loan payments. A year from now, that same mortgage of $300,000 will likely finance at closer to 5% with a monthly payment of $1610. That’s almost $180 more per month in payment. That’s about $2160 more per year! If you’re like me, I can think of a lot of nicer things to spend a couple of grand on rather than my home loan! By the way… that’s almost $65,000 more you’ll pay out over the life of the loan! What would you rather do with that?!
So the interest rate factor is just simple math right? Just a good reminder. But let’s add in the fact that inventory in Central Oregon is still pretty low right now. It seems builders have been slow to develop new neighborhoods and are a little “gun shy” after the last decades housing collapse. Due to the low inventory, prices of homes have continued to rise. In my humble opinion, this isn’t going to change anytime soon. You’d kind of expect that higher interest rates would discourage folks from buying right? Wrong. In actuality, historical data shows that interest rates have had little effect on housing demand. When people want or need a new home they buy a new home. They may not be able to afford the house they’d really like to have, but they still buy. It’s a “need” more than a “want”. But when inventory is low, the simple law of supply and demand says that when supply is low and demand is high, prices go up. It’s capitalism at it’s best (or worst)… it’s the American way!
Adding to the problem of housing availability is the influx of new folks to the area. Central Oregon is an awesome place to live right? That’s why I live here… you too! For some time it has been like a little hidden jewel that only us folks in the Northwest and West Coast have been aware of. Not so anymore. Central Oregon has received a lot of national press over the past couple of years. The combination of great brewers, dry powder skiing, world-class golf courses, and close proximity to an outdoor-lovers paradise has created a significant amount of buzz in the national and world media and people are starting to listen. Many of these folks are coming to retire, leaving the hustle and bustle of larger cities (like the Bay Area), or just looking for a more balanced lifestyle. Let’s face it, we have a lot to offer here in Central Oregon! So what does this mean for housing prices? It means even more pressure on inventory, pushing prices higher even more quickly. Add once again that many of these folks have a lot higher buying power after selling there homes in higher priced metropolitan areas, and prices can get ridiculously higher as sellers begin overpricing there homes in hopes of an out-of-town buyer with money to spend.
All these factors are swirling around out there in the not so distant storm that’s coming. The storm that, if you’re not prepared, is going to zap your buying power over the next year! Not only is there the potential to zap your buying power with higher interest rates, but combine that with the increase in home prices over the next year or so, and you might just be getting a lot less house at a much higher price! But there’s some good news here too! We’re in a pretty nice “calm before the storm right now”! Interest rates haven’t gone up significantly just yet and the spring rush of buyers hasn’t quite taken off. There’s still time to prepare! Listen to that little bit of advice instilled by your parents so many years ago and prepare for the rainy days to come. You’ve been taught well enough to come in out of the rain so to speak. So, If you’ve been thinking about buying or you think some life changes may be coming that will require some changes in your living accommodations, contact a full-time, professional real estate agent like myself to discuss your buying power and how I can protect you from the coming storm.
Michael Neely Brown
Real Estate Broker – Norwest Realty LLC
I have been in the sales and marketing fields for over 20 years, with extensive experience marketing products and services and building long-lasting customer relationships. I am your local real estate....