Let’s Talk Real Estate – September 2018
2018 started out with a bang and we saw the median price of a home in Jackson County increase to $285,000—up from $194,500 in 2013. This means the average home has seen its value increase $18,000 a year. The number of homes sold has also increased this year by about 8%, which makes the outlook even better. We would have predicted an all-time record year for Southern Oregon Real Estate but then came the Smoke, Tariffs and decreasing demand from the pot growers.
While sales of homes under $400,000 haven’t seemed to be affected by the smoke, there has been a decrease in sales and the number of showings of more expensive homes. Often, it is the visitors from out of state who are looking for homes in the price range of $400,000 and up. There are so many tourist attractions that need the tourists to survive such as the Oregon Shakespeare Festival, Britt Festival, Hellgate Excursions and the wineries, and they have all been hurt by more than a month of smoke. Tourists and prospective retirees will be back, and it’s unlikely the smoke will have a lasting effect, but in the meantime, we will see a dip in high-end home sales.
We have also seen a decline in value and demand for rural properties, especially irrigated, rural properties. We believe most of this decline is due to the end of the exuberance of marijuana legalization which caused a rush on irrigated land and drove up rural land prices. Today, there is so much marijuana grown in Southern Oregon that the prices have dropped significantly. In June, the OLLC temporarily ended licensing for new marijuana grows, which was the end of irrigated rural property being purchased for the purpose of growing pot. We still have, and will always have, buyers pursuing irrigated land to grow hay, vegetables, grapes, fruit and more, but not as many as we have seen in the last two years.
Newly-imposed tariffs on lumber, steel, drywall, nails and other key construction supplies have pushed up the average price of a new home. One study printed in the Wall Street Journal states the average price of a new single-family home in California has gone up as much as $20,000 due to tariffs. Another AP article states tariffs have increased the lumber cost of an average single family home between $8,000 and $10,000. Already in July, we saw record inflation at 2.9%. If this inflation continues, the Federal Reserve will have no other option than to increase interest rates, as a counter measure to limit the growth of inflation. As a reaction to the tariffs, and increased cost of goods, some major US manufacturers have already announced plans to increase their prices by as much as 20%. So, it looks like we may be facing a “Wall of Inflation” caused mainly by tariffs, which will lead to higher home prices in both the cost of the home and the interest rate to buy that home.
We have lost some valuable selling time to smoke, and we lost some demand from the marijuana growers, but as the smoke clears, the out of state buyers will be back. If they don’t hurry back, they may be surprised by how much their dream home has gone up in price and the increase in the interest rate to buy that home.