Hey everyone! Let’s dive in and talk about the future of the Roseburg Oregon real estate market. We’ve got some issues that are on everyone’s minds. All of the things you’ve been hearing about like the lack of inventory, rising prices, inflation, mortgage interest rates. What does that mean for the real estate market, and what is going to happen? We’re going to be talking about all that and more, debunking some myths, and looking at the real data so you have all of the information to make an informed decision on whether this is the right time to buy or not.
Lack of Inventory
Starting with the discussion of lack of inventory, why are there not enough homes for sale? Looking at the number of new listings over the last 2 decades, what’s surprising is that really Roseburg has a very similar amount of new listings hitting the market since COVID as we had before COVID. The last 10 years of data haven’t changed more than 10% from year to year which would accurately show the fairly stable market growth we’ve had over the last decade in recovery from the 2008 housing market crash.
The actual amount of listing inventory itself has been fairly stable with predictable peaks during the hot selling months, and less listings during the colder winter months.
So if the number of listings hasn’t changed why the heck aren’t there any homes for sale then?
Days on Market
Now you know what has changed? The number of days on market. In 2017, we could anticipate an average of around 90 days on the market before having an accepted offer. Compared to the Spring of 2021, where we saw our average days on market plummet to 30 days or less!
So what that means is that we have a similar amount of listings, but buyers are all rushing in as soon as the home is listed. This means we just have a lot more buyers in the market, and not enough homes. The number of new listings has been fairly stable, but our buyer demand has gone up substantially. I’ll give you a few quick reasons why this is happening, and with selling 125 homes in 2021 I can tell you who our primary clientele have been.
COVID changed a lot of things about the way we live. A lot of professionals are now working from home. They can now live anywhere they want without having to make the dreaded commute. Add in the riots, COVID itself, food and supply shortages, and the uncertainty of it all in these big cities that are more densely populated, and now living in a more affordable small rural town like Roseburg Oregon starts to make a lot more sense. We’ve always had a healthy amount of newcomers that want to retire here, but now we have a new wave of professionals that don’t have to wait for retirement.
And while all of that craziness was going on, guess what? Interest rates hit an all time low. With more people moving to Roseburg, rental demand and rental rates skyrocketing, and interest rates at all time lows, what a great time to become a homeowner and get out of your rental! In this market it hasn’t been uncommon to have 5 or more offers on the homes that are considered more of an affordable first time home buyer type property. The rates also made it a good time to sell the house you’re in, capitalize on the equity, and then upgrade to a larger home while interest rates are so low.
Between all of these variables it has led to a market frenzy of more buyers than ever before, but with an unchanged amount of listings leading to a low inventory we all have to fight over.
Median Sales Price
So the question is, what has this done to prices? We’ve had double digit appreciation year over year that has increased our values substantially over the last couple of years. And for the first time ever, even my $500,000+ buyers are in a position where they may be competing with other offers and where it may take a couple of tries. With a median sales price increase of over 15% from 2020 to 2021 it doesn’t appear to be slowing down just yet.
2018: 1793 units sold, median sales price $210,000
2019: 1704 units sold, median sales price $228,250
2020: 1895 units sold, median sales price $249,000
2021: 1908 units sold, median sales price $294,500
What’s going to happen?
So what does this mean, and where do I see it going? I see it going one of two ways. First we have to acknowledge inflation. It has become a very real issue. You now see nationally that: US consumer prices have risen 7.5%, rents increased 14%, gas prices increased 58.7%, and used car prices increased 40%. And we are being told as much as 80% of all US dollars were printed in the last 22 months. That money printing is driving up the cost of everything around us.
We have several types of inflation at work: supply and demand like we’ve been talking about, supply chain shortages (like we saw happen with toilet paper, and just about everything else), wage price spiral. Wages go up, which then causes businesses to raise the costs of goods and services.
I remember being 17 years old and being excited that minimum wage went up 10 cents and that I was getting a raise. I went to McDonalds the next day and the dollar menu was now the $1.19 menu. I remember thinking I actually lost money on the deal, and that my friends, is the wage price spiral.
So thinking about real estate, back in 1963 the median price of homes in the US was $17,800 and today it’s $408,100.
What is the best hedge against inflation? Real Estate. That’s why you see all of the big hedge funds purchasing real estate all over the country. If the smart money is doing it, there’s a good chance they know what they are doing and it would be smart to do the same because the money we have saved in our bank accounts is becoming worth less and less by the day.
Surging Mortgage Rates
The other way it could go is surging mortgage rates that in turn affect the affordability of housing enough that prices can’t continue to rise out of control.
I was recently refinancing an investment property I was rehabbing and was quoted 4% for a cash out refinance. Not a terrible rate. Then 90 days later when my rate lock was going to expire (because the construction took longer than expected), I was quoted a new 5% interest rate, meaning my monthly payment was going to go up $200!
$300,000 loan at 4% = $1,432
$300,000 loan at 5% = $1,610
That’s a $178 difference in monthly payment for the same priced home, just because the interest rate went up a measly 1%.
For a basic rule of thumb, a 1% interest rate difference equates to about 10% difference in a buyer’s purchase power.
If rates continue to go up, this will certainly impact real estate prices and affordability.
Of course none of us know what’s going to happen tomorrow. I had clients selling all of their property in 2017 and 2018 preparing for a market crash, and they missed out on one of the best bull runs in real estate history and multiple six figures in equity.
Another thing is sometimes we just have to accept that things change and this might be the new normal. I’m not able to buy a move-in ready Roseburg Oregon home for $100,000 anymore, those days are long gone and may never return. We don’t want to be like grandpa who bought his house for $17,000 in 1963 who is still sitting on the sidelines waiting for the market to “crash” so he can buy another $17,000 house. Chances are, those times have passed us by, and we need to invest for the now and for the future.
I think the most likely scenario is that with inflation and the cost of everything going up we will continue to see the king of all assets (real estate) go up with the cost of everything else unless we have some sort of unforeseen black swan event. In uncertain times it is best not to over leverage yourself, and make sure that you’re not buying a place anticipating that it will double in value, but instead buying something that you feel you can afford over the long haul even if things were to change. I’m still buying properties, but I’m doing so cautiously, and anything I buy today I plan on keeping over the coming decades and when you think on a long enough time horizon it’s going to be hard to lose with Roseburg Oregon real estate.
If you guys have any thoughts on todays video, your own predictions, or questions comment those down below.
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