What’s been happening in our market as we close out 2018? What can buyers and sellers expect from the 2019 market?
To answer these questions, we like to look at what we call “lead indicators” (i.e., factors that are predictive as to what might happen in the future) and “lag indicators” (i.e., trends we’re seeing right now).
Let’s start with lead indicators. Since last quarter, inventory has decreased between 7% and 12%, which is less than what we typically see on a year-to-year basis. In that time, the number of new purchasing contracts has stayed relatively flat. When you combine shrinking inventory with stagnating demand, it puts pressure on prices, and you may have noticed prices rising lately.
That brings us to our lag indicators. On a national scale, existing home sales have fallen for the last six months. Though we already mentioned that the average sales price is rising, it’s doing so at the slowest pace we’ve seen in the past two years. Since mid-summer, we’ve also seen the average days on market for homes increase.
Why is this happening? Along with rising prices, rising interest rates have made homes less affordable. Home affordability isn’t an easy thing to reverse, so we won’t be sliding into an easy buyer’s market anytime soon. This market pullback, though, will be much slower and more progressive than what we saw during the recession 10 years ago.
Interest rates, on average, are a full point higher right now than they were at this time last year, and they’re expected to keep rising throughout 2019. As rates rise, we’ll continue to see the market soften. This doesn’t mean we’re in for a “buyer’s” or “seller’s” market—it just means both buyers and sellers will have different opportunities.
If you’re a buyer, you won’t have as much competition moving forward, which might be a relief considering how fast-paced things have been in the past few years. Homes will still be more expensive, though.
If you’re a seller, you’ll need to be more in tune with how your home is positioned and take a more comprehensive approach to sell it. You can’t just ask for a certain price because your neighbor sold their home at the same price six months ago—you need to price your home competitively with what’s selling now.
These are a few factors to keep an eye on moving forward. If you have any more questions about our market or you have any other real estate needs, don’t hesitate to reach out to us. We’d be happy to help you.