Jason Boone answers frequently asked questions about the local real estate economy

Our team is getting a lot of questions from clients and friends about how the COVID-19 pandemic will affect the real estate economy, and we asked Jason to offer his perspective on how the local real estate market in Bend is currently faring, as well as what might happen down the road.

Should we adjust our real estate goals in preparation for another Great Recession, similar to the one triggered by the mortgage crisis in 2007?
I think it’s really hard to say for certain, there are several indicators that currently suggest that a recession is coming. Specifically, rising (spiking) unemployment, diminished corporate liquidity, increasing debt and a reduction in business activity are of concern. However, the Federal Reserve is pumping money into the economy in an attempt to avoid a recession, consumer spending is still robust in many retail sectors, and the stock market remains strong.

We recently had the opportunity to hear a presentation by a local financial expert about how COVID-19 is distorting the supply-and-demand imbalance of local real estate, and why this moment in time is different from the real estate “bubble” of 2006. Read the follow-up article by Bill Valentine for the Bend Bulletin here.

Is this a good time to re-finance?
Absolutely, mortgage interest rates continue to be at historic lows, with the average rate on a 30-year fixed mortgage below 3% for the first time according to a Freddie Mac survey released last Friday. If a borrower can save a minimum of 1% off their current interest rate it’s generally advantageous to refinance.

Are Bend homes still selling during the COVID-19 pandemic?
Most definitely. I’m surprised at the brisk sales activity that we’re currently seeing in Bend. When I think of an unprecedented, history-defining experience such as a global pandemic, which has caused massive spikes in unemployment, diminished business activity, shutdowns, and self-isolation mandates, it would be normal to expect the Bend real estate economy to crash. But it hasn’t, and demand continues to outstrip supply, and interest rates remain low.

Are property owners still listing homes for sale during the pandemic?
Yes, but not as many. I can certainly understand why someone wouldn’t want to list their residence for sale, effectively inviting a wide array of guests through their home. On the other hand, sometimes circumstances that necessitate a move motivates sellers to list, while other sellers see an opportunity to list their home in a low-inventory marketplace with low competition.

Are potential buyers still able to secure mortgage lending right now?
Yes, absolutely. There are several reports of lenders tightening their belts and as a result, some borrowers who might have qualified six or nine months ago won’t qualify now. This coupled with a diminished availability of some loan programs will certainly impact the availability of mortgages and the number of borrowers who qualify. However, there should be some consideration of what we use as a benchmark. If 2005 is the benchmark (which I don’t think it should be) then yes, it would appear that loans are very difficult to secure by comparison. But if the last five years are the benchmark, which is a considerably more reliable data set, then potentially a few consumers won’t qualify, and some may not find the loan product they need.

Some experts are predicting that residents of larger metropolitan areas will migrate to smaller cities that are more isolated. Do you think Bend will go through another period of population growth?
I think it’s an entirely reasonable proposition. About 10 years ago I went to the pub with about 9-10 other dads from my daughter’s Girl Scout troop. I was the only person who worked for a Bend-based company. The other dads worked primarily from home and telecommuted. Ten years later, working remotely has become even more common, especially in Bend. And the pandemic has only reinforced for many workers and their employers that work-from-home scenarios don’t necessarily affect productivity and offer increased work-life balance. Not only is it likely there will be increased migration from higher density areas, but also amplify the value placed on the ability to work remotely. The combination of these two lifestyle shifts could certainly drive more people to relocate the Bend.

What is your best advice to sellers who want to list their homes right now?
Nothing about my advice has changed. The three fundamentals still apply, the “3 P” rules:  Price, Presentation and People.

Price is paramount; it is the absolute most important component of marketing and positioning a home on the real estate market. Presentation is still exceptionally important, and collateral marketing (i.e. professional photos, staging and video) are requisite to generating excitement about seeing the home personally. How well a home shows and also how easily it can be shown also fall under the scope of Presentation. The ease, comfort and safety in which a home can be shown is increasingly important as some buyers are hesitant to visit occupied homes during this time.

The People you hire to represent your real estate interests matter. It’s important that your Realtor team is fully engaged in their business and not pursuing real estate as a supplemental career. It’s also important that they have a solid reputation within their professional community. The reality is that all business is human-to-human, and if your Realtor is well respected within the industry, other members of the real estate community (including other brokers, lenders, and escrow officers) will want to work with them.  This helps listings sell faster and ensures that transactions progress more smoothly towards closing.

What is your best advice to buyers who want to invest in Bend real estate right now?
Nothing has changed here either. A lot of factors must be considered to make the best, most informed decision possible. It’s imperative for a buyer to have a team (a real estate broker and a lender) that can help them ask themselves all the important questions to help them make an informed decision. A broker who can help a buyer take everything into consideration and make a deliberate, well-informed decision, coupled with a lender who can provide valuable strategic counsel rather than just presenting a menu of loan options, will help a buyer maximize their probability of long term success. 

Our group has developed a reputation for giving honest, unfettered advice regardless of whether the buyer’s decision generates income for us or not, to the point that we’ve actually been told if we weren’t so honest, we’d sell more real estate(!). I consider that a badge of honor. I recently advised someone to not pursue a real estate transaction because I didn’t think it made sense for them. In fact, I thought moving forward would not likely set them up for success. Had they moved forward and closed escrow on everything that was required to make the transaction happen, it would have generated commissions on three transactions, a considerable amount of income. But it didn’t make sense, so I told them not to do it.

I think it’s also important to consider the monetary metrics of purchasing a home. The decisions revolving around a home purchase have considerable magnitude, and certainly one component of that is emotion. But emotion can not overwhelm all of the other factors, and considering some financial calculations can help temper emotion, either towards proceeding with a transaction or move away from it. 

As an example, if you were to purchase a property for $400,000 now with 20% down and a 3% interest rate, your mortgage payment (excluding taxes and insurance) would be $1,760. Now consider the purchase of that same property after a 15% drop in the real estate market due to some circumstance. (My guess is we’d see interest rates climb to 5% prior to this market drop.) So, you would end up purchasing the property for $340,000 with 20% down and a 5% interest rate, and your mortgage payment would be $1,817.

Granted, your cash-out-of-pocket is less in the second scenario, but there’s also the loss of opportunity, loss of tax write-offs, and the loss of cash wasted on continued lease payments. Certainly, there a more factors to consider, but it’s a valuable illustration of how investing in real estate with a higher price does not equate to a bad decision. The general consensus is that buying in a strong market with higher prices is always bad, but it’s really not that simple.

Jason Boone has been a Bend-ite since 2003, and a Principal Broker for over 10 years. He is also a Certified Residential Investment Specialist (CRIS) and has earned multiple designations including Pricing Strategy Advisor (PSA) and Seller Representative Specialist (SRS).