The timing is interesting and follows my earlier blog post about the overall housing market and how conflicting some of the recent media articles have been. Bottom line fits with my earlier synopsis that with mortgage interest rates falling and seller asking prices lining up better with actual value and buyer affordability that buyers will be jumping back into the game.
Personally, I think it’s going to be a good time for both homebuyers and sellers over the next several months. If you had a house that didn’t sell recently check in with me and I’ll take a look at maybe why it didn’t sell this last go around and craft a plan to position your property in the best light to attract buyers and help you achieve your goals.
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.
I like to start with a broad view of the real estate market as a whole and then narrow the focus down to our regional area and product type, which is residential housing in Palm Beach County. Daily I get the question of, “How’s the real estate market?” Why do people ask me? Well it’s my profession and I’m in the real estate market every day, and I also think because there is a lot of confusing noise out there for homebuyers and sellers right now. Can you trust what you hear when the media reports seemingly conflicting news every other day?
This week I saw one article from CNBC and another from Housing Wire stating new home sales were in the tank. Down almost 7% from December to January. Wow that’s bad you think! Wait though, didn’t I just see a different CNBC article a week ago that in December new home sales reached a 7 month high and another that read, “Housing prices could be on the verge of heating up again …” Huh? What? Really, you’re just gonna change the reported outlook on the real estate market in a week?! So, the quarterly update from the media is market is cold then hot, then not again. I’ll post my overall thoughts on the housing market in a separate post.
What you need to know is residential real estate is a slow
mover. Most of the reports you see are guesstimates and then a couple months
later they’ll go back and put out a new article with the revised numbers. Real
monthly numbers going back 3 to 6 months to 12 months is a good trend line where
you can make an educated decision. Guesstimates on new home sales matter a lot
for builders and economists, but for the average homebuyer looking for a place
to live maybe not so much. As they reported in the CNBC article, new home sales
only make up about 10 – 12% of homes sales annually. Might be a bit rash to use
one tenth of the sales in the US to make a prediction regarding the whole
Why are new homes sales slow? I’ll tell you why in my thoughts on sluggish new home sales post.
Bottom line – ignore it. Unemployment is low and interest
rates are stable for the near future. It
is a good time to buy. Having a sub 5% interest rate on a home mortgage is
a great thing! If you are looking for a home for you and your family then you
just need to evaluate your personal budget, lifestyle, location and functionality
of the home. Your primary residence isn’t an investment, so don’t worry about if
I wait a year or five will I get a better deal. The people that waited 5 years
ago are kicking themselves. You just really need to evaluate what you can
afford. You’ll build up equity paying down the principal with your mortgage
payments. Do you have a down payment and steady employment? If you are buying a
home hoping that appreciation is going to make your mortgage payments then you’re
already in trouble. Don’t worry about the talking heads on TV. The investors
that have built up tremendous wealth in real estate did so by buying at the
middle of the market cycle, the top of the market cycle and the bottom of the
market cycle. Point is they kept buying and investing for the long-term, but
that’s a different topic.
Homesellers you are also homebuyers, so I wasn’t leaving you
out. It is a good time to sell. I’ll
leave it at that until another post. Knowing it is a good time to sell then you
have to evaluate the move through the homebuyer lens. Can I sell and meet my
homebuying or maybe even renting goals? Can you sell and get the home you need in
a location that works for your family at a monthly budget you can afford?
Synopsis: We have a flattening housing market with low interest rates and strong employment making it good for both buyers and sellers over the next year to meet their housing needs.