As home prices in Bend have reached unprecedented heights in the last several months, I am increasingly hearing worried whispers about foreclosures. I’ve been asked about the possibility of a wave of foreclosures striking our area. I’ve heard acquaintances state as fact that foreclosures are on the rise. Overall, I’ve sensed some angst about the level of distress in our housing market.

Now, I receive a weekly report of all foreclosures in Deschutes County, so I have a reasonably good read on foreclosure activity. And I hadn’t come to a conclusion that indicated fear or unease was in order.

Being the data hound that I am, I decided to dive a little deeper and take a look at what Deschutes County’s historical numbers show us.

My basic methodology of collecting and analyzing the data was this:
• I added up notices of default and Lis Pendens for each year dating to 1983.
• Beginning in 1988, I was able to compare the combined notices of default and Lis Pendens to the total of real property tax accounts. (Using real property tax accounts – rather than population – has advantages, as not every resident owns property or has a mortgage, and some residents might own or have a mortgage on more than one piece of property.)

I acknowledge there are limitations to the accuracy of this data extraction. Not all defaults result in foreclosure, and in some cases multiple notices of default or Lis Pendens are recorded against a single property and correlating to a single mortgage. Also, some years’ data is skewed because of how the county compartmentalized manufactured homes.

These caveats notwithstanding, to look at this information over a broad spectrum of time affords us the opportunity to draw some reliable conclusions. My methodology yields 33 years of data comparing the total of what I’ve termed “foreclosures” to the county’s total real property accounts. Those 33 years encompass a wide range of ambient economic conditions.

Most important relative to the general curiosity about foreclosures, we see 34 notices of default/Lis Pendens through the first 3½ months of 2021. That means this calendar year is on pace to have fewer such legal actions than in 2019, which ended with a 0.17 percent “foreclosure” rate. The rate in 2019 is the lowest on record except for 2020 (during which a pandemic-prompted forbearance on foreclosures was enacted, thus potentially skewing the data).

So, no, we have not seen a spike in foreclosures. Some rate of foreclosures is to be expected – even in the best of economic times – but the rate we’ve seen recently is nowhere near the level we saw before or during the Great Recession.

The median rate of foreclosure in our data set is 0.43 percent. Assuming that we’ll see this year about a 1 percent increase in real property accounts from last year, we’d need to see about 440 to 450 foreclosures for this to qualify as a “normal” year (much less a year with an abnormally high foreclosure rate) – and from there to draw a conclusion about the economy.

Looking at the years of data for which I make my comparison of “foreclosures” as a percentage of real property accounts, 19 of those 33 years had a rate of 0.50 percent or less.

There was a seven-year stretch from 2007 to 2013 when the rate was greater than 0.50 percent, topping out at 4.2 percent in 2010 (almost twice the national average at its height during this time span).

The lowest rates of foreclosure have been in the very recent past (2016 through 2020) and when Bend was far smaller than it is now (1989 to 1992).

I can understand why anyone with a memory of the housing market before and during the Great Recession might have worries about the current market. That era seemed to validate a “What goes up must come down” philosophy. But one of the primary sources of foreboding about the housing market presents a strong argument against a projection of more foreclosures.

The steadily increasing price of homes in Bend is 180 degrees from the usual conditions seen during increasing foreclosures. As CNN noted, “Foreclosures are closely tied to home prices – they tend to rise as prices fall.” Declining home values can put owners underwater (owing more than a home is worth) and thus less resistant to forestalling foreclosures; increasing home values heighten owners’ incentive to hold on to their homes.

No doubt this is a dynamic time in the Bend, Oregon, real estate market, with unprecedented sales prices and consistently low inventory. Having a Realtor who has experience and ethics – and can back those up with a careful read of market data – can put you in a position of strength. If you’re in the market to purchase a home, or if you’re considering selling your Bend property, I can be of assistance. I encourage you to contact me at (541) 362-1031 or to visit Bend Property Search to connect with me through my website.