In this section you will find the 2008 end-of-the-year update to the Bend and Central Oregon real estate market and trends, with population and MLS statistics, tables, graphs and more.

I added this section in 2003 in response to frequent questions about the Bend real estate market and added monthly updates in 2005. I hope it answers some of your questions about buying and selling real estate and the current market trends.

▼Stats & Facts
▼Analysis & Crystal Ball
▼Sales Price Tables
▼Average Price Graph
▼Median Price Graph
▼Sold On Lots Graph - Yearly
▼Sold On Acreage Graph - Yearly
▼Sold On Lots Graph - Monthly
▼Active Listings

The housing market changed significantly in 2008 from the conditions we saw just a few years ago. The market has been "adjusting" slowing and transitioning toward a more "normal" real estate market in contrast with the super-heated and unsustainable "seller's market" of 2004 and 2005. 2008 saw a continuation of this market correction and currently is a "buyer's market" with high inventory, low sales, downward pressure on prices and is still far from normal.

To understand the current market, it may be helpful to first look back a few years. Many variables came together to create the beginnings of a "seller's market" in late 2003 and 2004 with low supply and high demand, which led to rapidly increasing prices. Someone told the world how special Bend was, and people began flocking to the area. As one of the fastest growing areas in the nation, this in-migration contributed to a high demand for a relatively low number of homes. The once-in-a lifetime exclusion of taxes on the first $500,000 of profit on the sale of a primary residence, had been changed to allow the exclusion after two years of living in a home, and wasn't limited to once in a lifetime. This change in tax policy, the dot.com market bust, 40 year record low interest rates, record high increases in real estate appreciation rates and deregulated loans attracted short term investors. All these things fed the demand and fueled the run-up in the Bend real estate market.

The long held view of looking at the purchase of real estate as a long term investment, shifted to short term and the opportunity to "flip" real estate investments. Mortgage providers with access to "cheap" money reacted to the demand by providing "subprime" loan programs that made it easy for just about anyone to get a loan. However, lenders relied more on the rapidly appreciating prices to secure the loans, than the ability of the borrowers to repay the loan as in the past. The national media hyped the booming market and the profits that some investors were making, neighbors started telling other neighbors just how much they had made buying and selling, and there were even new TV programs describing just how easy it was to "flip" a house. More and more people jumped into real estate investment, and a "seller's market" was created. With relatively few homes to buy, almost every new listing that came on the market got multiple, competing offers. It became almost impossible to buy a home in Bend without paying more than list price and market values went up.

Prices and the number of homes skyrocketed as demand increased. With little land available to be developed, as the local government has been slow to expand the UGB (~85% of Deschutes County is some form of Government land), builders were willing to pay almost any price for buildable land. Building permits in Bend increased to levels that exceeded Portland as the builders ratcheted up to meet the demand, and increased their prices sometimes monthly. Sellers of existing homes followed suit. It was a great time to be a seller.

Meanwhile antigrowth, or controlled growth forces on the City Counsel enacted laws and building codes that further added to the cost of construction in the form of increased building permits fees, system development charges and other fees that when combined added $20,000+ to the cost of a 1,500 square foot home. The expansion of the Urban Growth Boundary was delayed to prevent sprawl, but resulted in huge increases in the price of the little land available for development. Prices reached a level where people who relied on local wages could no longer afford to buy a home. Supply began to exceed demand in 2006, appreciation slowed and many short term investors quit buying. Then with the "subprime market crisis" of 2007, the availability of easy financing dried up. Nationally real estate markets slowed or slumped, and people that wanted to move to Bend were unable to sell their homes. In-migration slowed, which further lowered demand. Locally sellers began to have problems selling. The excess supply put downward pressure on prices. It became a good time to be a buyer.

Much as the media helped fuel the run-up in the market, the media started hyping the problems with the market, and contributed to and perhaps exacerbated the problems. Starting in 2007 you could open just about any newspaper or watch TV just about any evening and see or read about some doom-and-gloom news about the "mortgage market crisis", "the foreclosure crisis", the "tanking real estate market", etc. While a lot of the national real estate trends were real, the stories tended to distort and sometimes exaggerate the problems. The net result was a loss in confidence in the market, buyers became afraid to buy, and the problems grew worse both nationally and locally.

But is the sky falling in Bend and across the nation as all the national news would suggest? I think it important to keep the news about the real estate market in perspective. Consider these quotes from an article by Blanche Evans a Realty Times Columnist in 2007:

"The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000." Business Week, 1969

"The median price of a home today is approaching $50,000 ... housing experts predict price rises in the future won't be that great." National Business, 1977

"The golden age of risk-free run-ups in home prices is gone." Money Magazine, 1985

"A home is where the bad investment is." San Francisco Examiner, 1996

Rarely are things as bad...or as good as they seem. It is a matter of perspective. National trends do not necessarily apply to Bend, to a particular neighborhood or property. Real estate is local.

My goal here is to provide some perspective on some of the most important factors nationally and locally that affect the Bend and Central Oregon market and how they impacted the market in 2008. This will include statistics, news events, local social and economic conditions and trends. I will also offer my personal opinions and analysis, and crystal ball projections as to where the market will go in 2009. My goal is to provide you with a perspective and some of the information you should consider if you are thinking about buying or selling real estate in 2009.

I am admittedly a "the glass is half-full" person, but I can honestly say that as bad as 2008 was, I don't see the sky falling. I see the Bend market continuing to "adjust" and "correct" in 2009, and having an exceptional long term future.

In 2006 I suggested that the Bend Oregon and Central Oregon real estate market was likely to slow down, adjust and become more "normal" in 2007. In 2007 I suggested much the same for 2008. While the market has been slowing down and adjusting, 2008 brought some major surprises and the market is still far from "normal".

• 2003 was a record year for real estate in Bend, but it was in 2004 that we saw the first of three years of double digit increases in sale prices. By the end of 2006 the average sales price of homes on lots had increased by 72% and the median sales price by 81% in the four years. The market began to shift from a "seller's market" to a "buyer's market" by late spring to mid 2006. By the end of 2007 prices reflected this shift and the downward pressure on prices, with the average sales price increasing only a modest 5%, while the median sales price dropped 2%. In 2008 we saw a continuation of this downward trending of prices with the average sales price dropping 17% from $424,134 to $353,302 and the median sales price dropping 16% from $345,000 to $289,900. In spite of this decrease, the average sales price of homes on lots in Bend still reflects a 50% increase in the last 5 years and 130% in 10 years, and the median sales price a 48% increase in 5 years and 127% in 10. (Table  Average Chart  Median Chart) The average list price of active listings at the end of the year dipped by 6% in 2006, went up by 2% in 2007 and down 8% in 2008 to $477,258. The median list price was up 5% in 2006, down 5% in 2007 and dropped 20% in 2008 to $316,699. (Table)
  
  
• The average sales price of rural homes on more than one acre increased 111% between 2003 and 2006, while the median sales price increased 98%. The average sales price of homes on acreage dropped 2% in 2007 and another 18% in 2008 to $589,783. The median sales price showed a 2% increase in 2007, but dropped 18% in 2008 to $489,000. The average sales price of homes on acreage in Bend still reflects a 69% increase in the last 5 years and 138% in 10 years, and the median sales price a 65% increase in 5 years and 130% in 10. (Table  Average Chart  Median Chart) The average list price of active listings at the end of the 2006 was down 9%, dropped 8% in 2007 and another 3% in 2008 to $918,345. The median list price dropped 1% in 2006, 16% in 2007 and 8% in 2008 to $669,000. (Table)
  
  
• As the market started shifting in Bend to a "buyer's market", supply began to exceed demand. The number of homes on lots that sold each year almost doubled between 2002 and 2005, but dropped 27% in 2006, another 27% in 2007 and 26% in 2008, or a total of 61% from the peak demand in 2005. Sales of homes on an acre or more showed similar trending with an increase of 53% in the number of sales between 2002 and 2005, but dropped by 34% in 2006, 41% in 2007 and another 30% in 2008, or a net drop of 73% from the peak in 2005. Given the higher prices for homes on acreage, buyers have increasingly chosen to forgo their desire for acreage, or "elbow room" and buy more house for the money in town as the supply increased and prices decreased.  (Chart-lots  Chart-acreage) Supply, or the number of listings increased dramatically and have remained relatively high. The number of active listings of homes on lots peaked this year in July at 1,639, and ended the year at 1,186 which was 5% less than 2007. The supply of homes on acreage peaked in August this year at 379 listings, and ended the year at 291, which was 29% higher than 2007. (Chart  Table)
  
  
• The Inventory Absorption Rate (Table) reflects the shift from the seller's market to a buyer's market. Historically, approximately 6 months worth of inventory is considered a "normal" market. Less than that is considered a seller's market, and above, a buyer's market with supply exceeding demand. With demand at a peak, supply hit a low in 2005 with just 379 active listings of homes on lots, which represented just 1.6 months of inventory, based on the sales rate for the previous 12 months (241.4/mo.). The 1,186 active listings in 2008 represents 12.7 months of inventory based on a sales rate of just 93.3/mo. This was up 30% from 9.8 months inventory in 2007. The inventory of homes on acreage was at just 94 listings in 2005 which represented a low of 3.2 months of inventory. With demand for homes on acreage far less than for homes on lots, by the end of 2008, there were 291 active listings, or 36.4 months of inventory. This was up 83% from 2007 at 19.6 months.
  
  
• In recent years Bend Oregon received a great deal of national press as "a best place to retire"; "the Palm Springs of Oregon"; "the recreational capital of Oregon", "a best adventure town", "a telecommuting heaven"; and other categories. As the reputation of Bend spread, it was ranked as one of the fastest growing cities in the nation. 2008 saw people continuing to move to Bend and Central Oregon in spite of the economy and sluggish real estate market albeit at a slower rate. The Portland State University Population Research Center, estimated that as of July 1, 2006 Bend's population increased 7%, or by 4,960 to 75,290 since 2005, and by 2,490 or 3%, to 77,780 as of 7/1/07. Somewhat surprisingly Bend grew faster in 2008 by 4.96% or 3,860 to 81,640 as of July 2008. Much of the slow down from the record setting growth rate in years past is because people wanting to move to Bend have been unable to sell their homes in other parts of the Country. This slowing in-migration was reflected by Deschutes County, which increased 6.4% in 2006 and 5.4% in 2007, but just 3.9% or 6,025 to 167,015 as of July 2008. Never the less, Deschutes County led the State in growth rate. By comparison, Multnomah County, the most populated county in the state increased by just 1.1%, or 7,855 to 717,880, the State increase was 1.2%, and 3 of Oregon's 36 counties lost population.
  
  
• The Milken Institute, a Santa Monica California based think tank, released a report in September that ranked Bend as the #3 best performing small metro areas of the 124 areas studied in the nation. This was down from last year's ranking at #1. The study measures both short and long term growth in jobs, wages & salaries, population and high tech.
  
  
• The Office of Federal Housing Enterprise Oversight released their housing price index report for the third quarter of 2008. U.S. home prices decreased by 6.0% since the third quarter of 2007, while Bend prices fell 10.0%. Bend had slipped from its number one ranking through much of 2006 to the metropolitan area with the 10th highest rate of house price appreciation after the first quarter of 2007. As of the second quarter report for 2007, Bend showed a decrease in prices for the first time of 2.07%, and ranked 138. The third quarter HPI for 2008 ranked Bend 241 out of 287 in the nation and showed a 3.16% drop for the quarter, but a net 58.8% increase over the previous 5 years. By comparison Portland ranked 163rd with a 18% drop. Salem ranked 136th and showed a 0.5% increase. Medford ranked 247th with a 8.47% drop. Oregon was ranked at 35th in the nation with a 2.14% drop in prices for the third quarter, a drop of 2.65% for the year and a 55.62% increase over the last 5 years. Nevada saw the biggest drop in price in the last year at 20.92%, California 20.79% and Florida 16.04%. The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings of the same properties. The HPI is also based on transactions involving only conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
  
  
• The Bend metro area (Deschutes County) regained the dubious distinction of the most "overvalued" housing market in the country after the third quarter of 2008 at 43.0% and $276,900, after placing second the second quarter at 46.6% (49.5% the first quarter), according to a Global Insight and National City Housing valuation analysis survey. Bend was 34.9% overvalued in the third quarter of 2005, 65.6% in 2006, and 62.3% at $315,100 in 2007. Bend reached a high of 89.3% overvalued in 2006 and took over first place after the first quarter of 2007 at 78.7%. In the third quarter of 2008, 241 of the 330 metro areas studied showed price declines. Most of the top 50 were in California, Florida, Nevada and Michigan. In the third quarter 2008, Bend was one of only three housing markets, down from a peak of 53 in 2006, that were determined to still be "extremely overvalued" (more than 35%), while for the Country as a whole, the market was now undervalued by 3.8%. The Pacific NW remained the only region as a whole that remained overvalued. Portland ranked sixth at 31.8% and $298,100. Eugene, with a median home price of $235,400, ranked No. 10 at 27.3 %. Salem, with a median home price of $217,900, ranked No. 14 with 25.2 %. Medford, with a median home price of $241,100, ranked No. 21 at 20.8 %. Corvallis, with a median home price of $278,400, ranked No. 32 at 15.6 %. The survey takes into account differences in population density, relative household income levels and historical valuations. However this report does not account for those who moved to Bend with large amounts of equity, and other income streams that aren't dependent upon the local job market.
  
  
• The City of Bend published an updated proposed Urban Growth Boundary and UAR expansion plan in June of 2007. Most of the expansion was NE of the City giving priority to the City's Juniper Ridge project, which resulted in wide spread criticism and a call to stop the project and change the proposed UGB. Transportation issues with ODOT, school boundary issues with Redmond, a lack of community support for the idealist Juniper Ridge concept in general, and other issues and appeals will continue to delay the expansion for some time. The strong and widespread opposition to the Juniper Ridge project did result in the City at least revisiting many of these issues, and reconsidering the current plans for expanding the UGB. Based on this opposition, the City severed the admittedly ill-conceived agreement with the original developers, but had to pay them around 2.5 million dollars to get out of the agreement. The City also announced they hoped to have a revised UGB plan finished by June 2008, but instead posted five alternatives maps over the next 6 months. At the end of the year, the city council chose and recommended a new map . Notably absent from the final map is much of the Juniper Ridge project acreage that was included in the original proposal. This process is still likely to require several years before any new land will be annexed into the City, but what is ultimately decided will have a major impact on the future of the overall market.
  
  
• With the increasing population, real estate prices and anti-growth sentiments, Bend has seen a number of laws enacted and building code and policy changes in recent years to address "affordability" and "controlled" growth. A law was passed in 2006 that effectively put a moratorium on mobile home park owners closing their parks and redeveloping the land in an effort to preserve the "affordable" housing. Another law attached an "affordable housing fee" to all new construction, and other laws were considered that would require developers to subsidize "affordable housing". After previously changing the zoning laws to prevent sprawl, and maximize in-fill by decreasing the minimum lot size, building codes were again changed to reduce the size of homes that can be built on any particular lot, because the City Council did not like how large houses looked on the small lots. As a result, this increased the dollar per square foot cost of new homes, and decreased affordability. The sum result of these actions did slow growth and sprawl, but also had some unintended consequences - increased prices overall and less "affordable housing". Furthermore it was the act of not expanding the UGB and making more land available, that was the single most important reason for the high prices of homes. The extremely limited supply, high demand, and the resulting high cost of land made building "affordable homes" nearly impossible. 2009 will see a new City council with hopefully a more realistic attitude about growth and the future of Bend.
  
  
• In response to the national subprime mortgage problems, the Hope Now Alliance, a partnership between mortgage companies and nonprofit housing counselors, began a nationwide campaign in November 2007 to offer help to home owners who were having trouble meeting their mortgage payments. Changes were made in 2008 including changing FHA lending guidelines to assist borrowers in trouble, but the efforts were not enough to head off a national credit crisis in 2008. The Emergency Economic Stabilization Act of 2008, was signed into law October 3rd. It represented the largest financial "bailout" in US history. It was intended to free up the credit freeze that came to a head as September ended. It was hoped to have the biggest impact on the real estate market of any action taken by Washington thus far, but it has not. Further actions have been and will be taken, but it is unclear as to how Washington is going to help stabilize and improve the real estate market in particular, and the economy in general.
  

Since late Spring of 2006, the Bend Oregon real estate market has been going through a period of adjustment and correction, from a "seller's market" with record high sales and appreciation rates to a "buyer's market" with low sales and decreasing prices. This market correction intensified in 2008, especially in the last quarter.

Since September there has been lots of news of the far reaching ripple effect of the slow real estate market and the mortgage crisis. We have seen a credit freeze and the biggest financial crisis this Country has seen since the Great Depression, which has impacted the global economy. We saw the biggest financial "bailout" in history to the tune of almost a trillion dollars. The stock market dropped and unemployment jumped across almost every industry. Locally as the real estate market slowed, we have watched foreclosures and short sales increase, the City and County has had to cut budgets and lay off staff, unemployment is up in general and all real estate related and other businesses have been impacted in some way. Even my company, RE/MAX Equity Group did not escape impact, and closed the Bend office in November. 2008 statistics for Bend reflected this turmoil.

The market shift that began in 2006 saw inventory levels begin to climb and demand decrease as measured by the number of homes sold. The number of homes on lots sold increased by almost 100% from 2003 through 2005, and has dropped by 61% through 2008. The total 1,119 sales in 2008 were 27% less than 2007, and is the lowest number of sales since 1997. The 96 sales of homes on acreage were 30% less than 2007 and reflected the lowest demand since before 1990, when I first started compiling statistics. While it is historically normal for sales to drop off in the winter months, the last quarter of the year was far from normal. The low number of closed sales reflect the lack of demand since the credit freeze and crisis that came to a head in September. With both the national and local economy and unemployment getting progressively worse, it was not too surprising that many consumers stopped most discretionary spending, including buying real estate. Nationally and locally consumer confidence reached the lowest point of 2008.

One of the keys to the market becoming more "normal" is to absorb the excess inventory and bring supply back into balance with demand. While the supply, the total number of active listings of homes on lots did drop 5% by the end of 2008, the inventory absorption rate jumped 30% from 9.8 months of inventory to 12.7 months, based on the sales rate for the previous 12 months. The inventory of homes on acreage faired even worse with a jump of 83% to 36.4 months of inventory. Remember that historically around 6 months of inventory is considered "normal".

Though the Bend market is somewhat unique and has shown some resistance to national trends in the past, it is not immune. While much of the rest of the Country saw prices dropping, Bend's average and median prices remained somewhat stable through much of 2007. After more than two years of high supply and low demand, the continuing downward pressure on prices became more measurable in 2008. The median and average sales prices of homes on lots dropped 16% and 17% respectively. List prices also dropped with the average list price down 8% and the median down 20%.

Besides the downward pressure on prices because of excess supply, much of the drop in the computed sales and list prices since last year is because of the big jump in the number of low priced short sale listings and bank owned properties on the market. Once again, the Bend market had largely escaped the wave of foreclosures across the Country until this year, but these distressed properties now represent a significant portion of both sales and active listings and is having a major impact on the rest of the market. Distressed properties made up ~39% of the sales of homes on lots for December, and ~23% of the 1,186 active listings at years end.

While the statistics and most of the news for 2008 was not good, there was some positive news and trends. For example, the make up of the current inventory is substantially different than last year, and could indicate that there we are closer to absorbing the excess inventory than the total number of listings indicate.

Last year there was a higher number of newly constructed houses on the market. Since then builders have largely stopped building new spec homes, and many of the remaining new homes in the current inventory are being blown out by the builders at prices below cost. By the end of this year many of the new construction active listings were "pre-sales", which means the builder will only build the houses if a buyer contracts for them. In the past, builders did not list new construction unless they were actually built, or under construction, and many times sold them in-house and never did list them. The increasing number of "pre-sales" listings inflate and distort the actual inventory of homes on the market, and thus the statistics.

Last year there were many sellers who did not have to sell, but still had the dream of flipping their houses for a huge profit as others had done in the "seller's market" years. Many of those sellers have dropped out of the market this year, and more of the current listings are homes that the sellers must sell.

The average seller that must sell will generally lower their list price to their breakeven price. If they can't sell at that breakeven price, then they can try to negotiate a short sale with their lender or failing that the next step is foreclosure. While an investor or homeowner loosing their home is never a good thing, there is a flip side. Though these homes still need to be absorbed, this is part of a relatively short term purging process. Furthermore, It is one of the last stages of the market adjusting and balancing supply with demand, and as such suggests that the market may be getting closer to bottoming out. There also seems to be an increasing number of investors and first time home buyers coming back into the market to take advantage of the low prices of the distressed properties. Once the short sale and bank-owned properties, and "blow-out" new homes are absorbed, then the market and the inventory levels will approach more "normal" levels in relation to demand.

Even the news that Bend is the most "overvalued" market in the nation can be seen in a positive light. First of all prices have come down to the point that the Bend market is now considered as 43% "overvalued", but this is less than half of what it was in 2006 (89.3%). The downward trending is more important than the % overvalued number, especially since that number is probably overstated anyway. The study does not account for other income streams and the equity many people bring to Bend when it computes the "household income" for the area. If it did then the 43% number would be considerably lower. Furthermore, though prices have dropped, the Bend metro area is one of just three housing markets that were determined to still be "extremely overvalued". This can be viewed as a bad thing, or that people actually still "value" living in Bend more than almost anywhere else in the Country, and have been willing to earn less and pay more, to live here.

Both the Office of Federal Housing Enterprise Oversight housing price index report and the Global Insight and National City Housing valuation analysis survey indicate that the national market is getting better. In fact, in the second the authors concluded "In short, the "bubble" is gone and house prices reflect a healthy balance in relation to long-term fundamentals". As other markets around the Country improve, more people will be able to sell, and in-migration to Bend will increase.

In fact, population growth was some of the most positive news in 2008. People are still moving to Bend at a higher rate than anywhere else in the State. The population increased by almost 5% from July 2007 to July 2008. This was actually an increase in both total numbers and rate over the previous year. In-migration is one of the most important keys to the local real estate market recovery. Eventually this increase in population will be reflected in increased demand and sales and lower inventory levels as consumer confidence improves.

With all that said, many buyers are still finding it hard to qualify for financing with the tight lending standards and the "credit freeze". Other potential buyers are waiting and hoping for even lower prices. Perhaps most important, with the national and local economy so shaky, many buyers are simply afraid to buy until things improve or stabilize and their confidence is restored.

Will prices go down more? Should you wait? As long as supply exceeds demand there will continue to be downward pressure on prices, but many of the lower priced properties will be for short sale and bank-owned properties, and builder blow-out priced homes. Some sellers cannot reduce their prices any lower as they are already priced at breakeven prices, which partially explains why average and median list prices have not dropped more. The seller that does not have to sell, will often hold their price or withdraw from the market. Certainly, prices of some properties and some neighborhoods will go down some more, but even in a downward price trending market such as Bend has been experiencing, there will be properties, and perhaps neighborhoods that will not decrease in price.

So the answer to the question about waiting until prices bottom out is, it depends on the property and the circumstances and goals of the buyer. Some "best value" or the "best for you" properties may not go down in price, and if you want to buy those properties, you may find today's prices as low as they will be. And even if they do go down a bit more, you might not come out ahead by waiting.

Rising interest rates could negate any advantage of waiting. If interest rates go up 1%, while the sales price goes down 10%, then the price paid would be the same whether you waited for the price to drop, or bought today at the lower interest rate.

How much longer will it take before the excess supply is absorbed? Will demand and sales increase and when will the market bottom out? I have attempted to show how if you look below the surface of the statistics, we could be in the latter stages of absorbing the excess supply. While it is impossible to predict when the market will bottom out, it is important to remember that most of the reasons for the rapid growth of Bend still exist, the most important being - people want to live here. As other markets around the country improve, more people will be able to sell, and in-migration to Bend and demand will increase. This will certainly help in absorbing the excess inventory and helping the Bend market normalize

The United States is now in an official recession. Nationally and internationally we are in a financial crisis that is unprecedented and that has even the experts of the world unsure of what will happen, and how to fix things. It is unclear how the efforts by our Government will impact the national financial crisis, let alone the Bend economy and real estate market. Consumer confidence is at an all time low, and most every economic expert predicts that things are going to get worse before they get better. I expect the Bend economy and real estate market to also get a bit worse, but also get better, faster than most.

The crystal ball questions remain - what is in store for 2009? Will prices fall? If so, how far will they go? When will the market bottom out? Though it is hard to predict what to expect in 2009, there are some variables to watch that will impact and steer the market.

In the short term, I expect the number of sales to continue to be low or drop as compared to years past. The winter months are traditionally slow, and will be slower this year. It is too early to predict what will happen this spring and summer, but I do expect more buyers coming back into the market, especially investors buying distressed properties. However, many buyers are likely to continue to hold back for more signs of the economy improving, prices bottoming out or generally until their confidence in the future is restored. Never the less there is a build-up of buyers that will eventually move back into the market, and when that happens the market could adjust more quickly. Furthermore I expect there to be an increase in the incentives and actions by the Government that will help in tempting more buyers back into the market. The success of these Government interventions will be key to a recovery.

Population growth is one of the key variables. Contrary to most expectations, people continued to move to Bend in 2008, and at a higher rate than 2007. Though the rate of in-migration may slow, my guess is that growth will continue in 2009. If the markets around the Country improve, more people will be able to sell, and in-migration should increase, which of course will increase demand. It is also important to remember that it takes far fewer people in number to move to Bend to impact the demand for homes, than a large city such as Detroit. However, with unemployment high and the National recession, there is a possibility that we may actually see a net loss in population as people move else where for jobs, which of course would have a negative impact on the recovery.

Another key variable will be interest rates and credit availability. If interest rates go down further, then more people will qualify for higher loan amounts, assuming that they can get loans. Right now even though there are a lot of good loan programs available, we are seeing very restrictive underwriting guidelines, and the relative credit freeze is making it hard to obtain loans even for the most qualified applicant. The need to work with a very experienced and professional loan broker will be critical if you want to obtain financing in 2009. I do expect interest rates will remain low and most likely go even lower. I also expect lenders to loosen up lending guidelines and financing availability to improve in general. Hopefully the Government efforts will help facilitate this.

Short sales and foreclosures are likely to increase as a percent of sales and active listings. The low prices of these properties will lower the computed average and median prices, but also entice more buyers to return to the market. However, until these distressed properties are absorbed, it will be difficult for the average seller to compete. How effectively the new administration addresses the "foreclosure and credit crisis" will be key.

Local unemployment rates reached levels higher than the national average in the last quarter of 2008. As I mentioned, if people can't find jobs, they may have to move elsewhere and that would slow the recovery. The good news is that the Bend economy is much more diversified than it used to be when it was primarily dependent upon the timber industry, and thus is more likely to rebound more quickly than in the past. Bringing in more employment land in the Juniper Ridge area may be key to spurring increased employment.

Many housing forecasters believe that we are approaching the bottom of the market and that 2009 will be better than 2008. Others are more pessimistic and think it will take several more years for the national real estate market to rebound. What is not clear is what the ripple effects from the national economy and trends will be on the Bend market.

Though the Bend market has shown some resistance to national trends in the past, it is not immune. Again, the market is likely to get worse before it gets better. However, I believe that most all the major reasons why people want to live in Bend for the quality of life and lifestyle still exist, and that as Bend led and outperformed most areas on the way up, that it will also rebound more quickly than most, and has a better long term future. Whether that will happen in 2009 is yet to be seen. It all depends...

In 2009 buyers and sellers must take care to not make real estate decisions based solely on what happened in 2008, any particular study, set of statistics, general national trends or what they might hear on television. As I have tried to describe, there are a lot of variables that will affect the dynamic Bend and Central Oregon's real estate market, which makes it hard to make general recommendations. Therefore my advice for 2009...it all depends on your particular situation.

If your economic and job situation is fairly stable, 2009 could be a good time to buy given the low prices, low interest rates, large selection of houses to pick from, and the most negotiation leverage you are likely to ever have. There are many opportunities for the first time home buyer, long term investors, or someone who will live in a new home for 3 to 5 years. There are some exceptional values on the market and an increasing number of properties that come closer to penciling-out as rentals and good long term investments. Last year there were 13 listings of homes on lots for less than $200,000 on the market, but 2008 ended the year with 166. And even though they are more difficult to obtain, there are good conventional loans available for buyers with good credit; FHA loans available at 96.5% LTV with FICO scores as low as 530; construction loans; and investor loans with as little as 20% down payments. Once again, it all depends on your particular situation, but if you do plan on eventually buying, you should be getting your ducks lined up and ready to act. Among other things, this means getting pre-approved for your financing with a good experienced loan officer, and keeping yourself educated about the market so when the right house comes along at the right price, you will be ready to act. I can help with the education.

If you are waiting for prices to bottom out, remember that the bottom can only be viewed in hindsight, and that eventually the excess inventory will be purged and prices will start back up, as will interest rates. Buying while the market is adjusting can be wiser than sitting on the fence and guessing when prices will bottom out, and risk loosing out on the "perfect" home or the low interest rates. Once again, remember that if interest rates go up just 1%, then you are effectively paying 10% more for any property, and it might not be in your best interests to wait. There may never be a better time to negotiate a "best buy" than in 2009.

Sellers will continue to be very challenged to compete in this buyer's market for the relatively few buyers against the increasing number of below cost, blow-out builder prices, and the low priced short sale and bank owned properties. If you don't have to sell, it might be wise to wait. If you need to sell, then to use a phrase I have used often this year, "sellers are facing a price war and a beauty contest, and they need to win both". If you need to sell then you will need to price and position the property very aggressively from the start. While the market adjusts, those properties that have the best location, the best "curb appeal", the best condition, and the best value for the price range and neighborhood are the ones that are most likely to sell. Buyers will be cherry picking. Good planning, marketing and positioning will be critical. In some cases there will be only two solutions for sellers - time or price.

As I have said, Its almost impossible to predict how long it will take for the market to adjust and shake out. The market may become more "normal" in 2009, or it could take much longer. In my view, Bend will continue to grow, the market will rebound, and smart, educated, long term investments in real estate will be safe. Should you buy or sell? As I tried to say above, be careful about believing everything you read or hear. What is happening nationwide, isn't necessarily applicable to Bend. What is happening across town in one neighborhood, isn't necessarily what is happening in your neighborhood. Be careful about making decisions without getting all the facts and a full perspective. Every property and personal situation is unique. Buying or selling depends on the particular property, your circumstances and goals. With so many variables in play in today's real estate market, the need to educate yourself has never been higher. There is both danger and opportunity in today's market.

Come back each month to see if the prices are going to drop or increase and what happens in this dynamic market. In the meantime, please contact me if you have questions or want to discuss these trends and your particular circumstances in more detail, and whether you should buy or sell. It all depends...