This is a kinda semi-quarterly market update for November 2018 – January 2019. Recall in an earlier post I mentioned real estate being a slow-mover. We are generally always looking in the rear view mirror with our data. It’s mid-March but we only have accurate numbers up to January from the local real estate board because it takes time to input and verify the information.
I think it’s very interesting to look at this Halloween through the New Year transition period of ending one year and starting another in the context of all this recent slowing housing market news. Read the My Thoughts post for my overall view. Is the housing market in Palm Beach County good? Is it slowing? Is it a good time to buy a house? Is it a good time to sell a house? The answer is yes, yes, yes and yes!
Here’s the data first.
The past 3 months in Palm Beach County the number of closed sales compared to same time last year has fallen steadily, so much so that we went from a 11.4% decrease in December to a 23.3% decrease in January compared to same time last year! Wow! If I’m looking at these charts together and seeing 4% decrease one month and then 11% the next and then 23% down I might be looking around like chicken little wondering if the sky is falling. What is happening? Let’s take a look at all the factors.
First off, average 30 year mortgage interest rates blew through the 5% mark for the first time since 2009. As soon as that happened buyers pumped the brakes and said wait a second. In 2009 median home prices in our area were under $200,000 and now we are at $338,000. Same interest rate with higher prices equals less affordable and they needed to recalculate what they could reasonably afford in a payment.
Homeowners are meanwhile seeing these charts.
Home prices steadily rising year after year. Well then if I’m seeing that then I’ll just list my price a little bit higher than that last sale because it looks like the market is still going strong. We have a little bit of a disconnect.
Where are we at now? Again looking in the rear view mirror to where we are now. Over the course of the past year we had an interest rate increase over 5% and a rising median sales prices of 5%. The market cooled because buyer’s affordability got pinched and they needed to reassess. Sellers weren’t ready to lower their asking prices because the market still said prices are going higher. We see the disconnect in those first local market update charts from November to January where the number of closed sales were down. It’s a funny thing because I closed 6 sales between December and January, so just because it’s down doesn’t mean we aren’t selling houses.
This is what I expect will happen in the next few months.
I think this chart shows it the best. Going back the past 10 years in good and bad markets the housing market in Palm Beach County ALWAYS trends higher first few months of the year. Doesn’t matter if its a condo or a single-family home we experience a bounce in number of closed sales beginning of the year. We will get some additional help from 30 year mortgage interest rates coming back down around 4.5% as of today. More sellers listing their homes adding to the current inventory will get those sellers that have been sitting on the market awhile to get their asking prices closer to market and more competitive and we will start to see the closed sales numbers go back up.
Sellers it is a good time to sell, but the window until we reach more of a buyer’s market may be closing. About 75% of “housing experts” surveyed by Zillow think we will reach a buyer’s market by end of 2019. The deep effects of that trend you probably won’t notice until 2020 – 2021, so the time to move is now if you’re considering it. If mortgage interest rates creep back up over 5%, which everyone expects they will, you may be forced to be selling and buying with less favorable conditions.