Change is in the Air
Toward the second half of 2018 it was evident that the real estate market was changing. Properties, that at the end of 2017 would not have lasted on the market for more than a week, began to linger a little bit longer.
There were less showings, and less desperation about getting a showing quickly. Sellers who once had buyers fighting over their property were receiving less offers at a noticeably diminished pace. Sellers were also lowering prices, being more flexible in the terms they accepted and, in some cases, even contributing to closing costs.
If you work on the ground floor like myself, helping people buy and sell homes, it was evident that change was in the air.
Median Home Prices Go Down, Down, Down
The economy’s recovery from the 2008 recession hit tilt in the last quarter of 2017. Median home prices peaked at $338K. By the the second quarter of 2018 the median had sunk to just over $315K. The drop should have promoted increased sales but there was also the question of rising interest rates.
Rising Interest Rates
In 2018 interest rates began to rise steadily and teetered near 5% for the first time in over 7 years. A mere 0.5% increase in the interest rates can mean, for some families, the difference between being able to afford a home and not afford one.
Decreased Purchasing Power
The cost of living has steadily climbed but there is no indication that wages have accompanied that pace. With rising home prices, and rising interest rates but no complementary rise in wages, the result has been a decrease in purchasing power. According to one recent article, home affordability is down by 15%.
For home sellers this means that the pool of potential buyers has decreased. This gradual decrease has forced sellers to be a little more flexible on sales price, terms, and seller concessions. For buyers that are still in the market, this is a good thing.
More Homes for Sale on the Market
The result of decreased home sales has also led to a greater inventory of houses for sale. This increase, along with the fact that the number of buyers has decreased, gives buyers more options to choose from and the luxury of being pickier.
Is 2019 The Year of the Buyer?
So does all this mean that 2019 is the year of the buyer? In my opinion, not quite yet and here is why.
There are still buyers in the market. Rising interest rates have definitely made some people think twice about taking out a mortgage, but it has not discouraged everyone. The slowdown as a result of higher interest rates has also caused home prices to stabilize or drop. For some buyers this has created an opportunity for them to acquire a new home.
Interest rates are still reasonable. While interest rates are not as low as they were just after the economy began to recover from the recession, they are still pretty reasonable. This past week Freddie Mac announced that 30 year mortgage rates dropped to 4.45%. With interest rates expected to rise over the next year to over 5%, maybe as close to 6%, getting a mortgage now and locking in the low rate is a good idea for those thinking of buying a house.
Now is the best time for homeowners to cash in on your equity. With home sales slowing and prices stabilizing or dropping slightly, now is the optimal time for homeowners to cash in on their equity before prices drop even further.
The Opportunity Market
According to Danielle Hale, Realtor.com’s chief economist, 2019 will certainly be more favorable towards buyers but “we’re still a long way from a full reversal” (Sept 2018).
Real estate market cycles last vary from 10 to 16 years according to an article in U.S. News. During a cycle the market shifts from seller’s market to a buyer’s market with a period of balance and opportunity in between. Scott Durkin, CEO of Douglas Elliman, in an interview with Inman news clarified this point when he stated that we are entering “…an ‘opportunity market,’ which is … a market where we are able to match buyers and sellers because it’s become a negotiable market”.
2019 is not the year of the buyer. In fact, it is the year of the buyer and the seller. Both buyers are sellers are poised to take advantage of the opportunities that have arisen from the transition that is occurring in the current real estate cycle.
If you are a buyer or a seller and there is anything in the world I can do for you, all you have to do is let me know how I can help.
Happy Buying and Selling! Have a wonderful 2019!
Désirée is a licensed Florida Realtor and Real Estate Influencer committed to a high-level of professionalism and to helping others with their real estate endeavors through education. Désirée Ávila was an award winning teacher for 10 years and has a doctoral level education in Educational Technology. Désirée is a lifetime local resident of South Florida and is fluent in Portuguese, Spanish, French and Italian.