The Joyride May be Over in the Country’s Housing Market
Typically we think of the housing market as favoring either buyers or sellers, but 2019 may be a bumpy road for both. A number of factors are converging on the national housing market to make it so.
Along with general national trends, each region of the country has unique factors that impact house prices. Employment trends, climate, cost of new construction, population growth or decline all play a role. As Properly sells homes in Atlanta and Charlotte we’ll start with what’s happening in the Southeast housing market.
In terms of job creation, the Southeast is booming. The region, encompassing Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee, has been creating an average of 33,300 jobs a month, according to a report from the Federal Reserve of Atlanta.
With Baby Boomers retiring to warmer climates and young professionals seeking jobs, population in the region is growing. The net population growth in the Southeast was 512,000 in 2017 alone. The Federal Reserve predicts that economic growth will continue in the Southeast due to population increase, a relatively affordable cost of living and a mild climate. The only caveat is whether housing supply can keep up with demand.
National Housing Market Outlook
Home prices, while still rising, are rising much more slowly than in the past. This is not good news for sellers. Over the past decade, the combination of low inventory supply and low interest rates meant that houses sold for the asking price, or more. CoreLogic, a financial data and analytics company predicts that 2019 house prices will rise 3.4%. In 2018 house prices increased by 5.8%. Since the market began to recover from the real estate crash, house prices increased by 52%. This level of growth is not sustainable.
Home sales are declining in many metropolitan areas.
Data collected by the National Association of Realtors, revealed that existing homes sales dropped almost every month in 2018, to 4.99 million. This is more than 10% below sales the previous year. With prices still rising, albeit more slowly, and interest rates also rising, many buyers simply can’t afford to buy. In addition, consumer confidence is faltering, with more consumers saying it’s not a good time to buy a home. According to financial services company UBS, that’s happened twice in the past 26 years. Both times were right before a recession.
Housing inventory supply is high.
Data from the NAR shows housing inventory supply nationally is up from 1.83 million in April to 1.92 in May. However this number depends on price point. The number of high-priced homes, priced over $750,000, has increased 11%. At the same time the supply of affordable, entry-level homes has decreased 7%. This is good news for buyers at the top end of the market and for sellers at the bottom end.
Buyers are less willing to buy and to pay asking price.
Given rising interest rates, good housing supply, stagnant wages and the new tax laws on state and property deductions, buyers seem willing to take their time buying. According to Zillow, this February was the first time in four years that days on market have risen. This is up from 92 days last year to 96 days. The same report revealed that 14.6% of listings had a price reduction in March, compared to 12.7% last year.
In a nutshell, the rollicking housing market we’ve seen in the past is slowing down to a sedate walk. Sellers need to be smart about their listing price and realistic about the market. If your home is on the market or you’re thinking about selling, you may have to swallow hard and consider lowering your sale price. Buyers can be choosier about what they buy and when they buy it, especially at the middle to high end of the market.
Shameless Properly Plug 😉
At Properly, we use data-driven analysis and regional experience to monitor local housing trends, especially in our key markets. Our data is showing the same indicators outlined above, with a few key differences.
- Properly listings are holding steady on pricing, we continue to sell at 98% of our recommended list price.
- Sell-through is performing at the same level as last year.
The reason we’re beating the market in terms of pricing and sell-through is because we’re pricing homes to the new normal of the market, and not towards unrealistic prices that result in homes sitting on the market.
If you’re a homeowner in Atlanta or Charlotte and are thinking about selling your home this year, find out how Properly can help sell your home 3 times faster than average. Just enter your address here, answer a few short questions about your home for a free valuation report on your home.
Check out our in-depth look at the Atlanta housing market in the Properly Insider article; Is Atlanta headed for a slowdown?