Is the Housing Market Shifting?

To Favor Buyers? In recent years, home prices have gone up, up, and up.

In this 'seller's market,' home sellers can expectfull–price and even over–asking–price offers, and often experience bidding wars among hopeful buyers to drive their sales price even higher. 

That tide may be turning for some sellers.

Approximately 14% of nationwide listings reduced their asking price in June 2018 — up from a low of 11.7% at the end of 2016. Price cuts are concentrated at the most expensive price–points in markets that have seen out sized price gains in recent years.

In fact, growth in home prices is slowing in nearly half of the 35 largest U.S. metropolitan markets, with Sacramento and Seattle reporting the greatest slowdown since the beginning of the year.

All Real Estate Is Indeed Local

Forecast for 2018 This year both household growth and net in-migration in Salt Lake County are projected to be at record levels. Net in-migration of 6,900 individuals and households growth of 8,500 are expected.

This level of growth will support strong demand for housing. Demand will also be given a boost by buyers jumping into the market hoping to beat higher interest rates.

These demand conditions will push total sales above 18,000 units, but it is unlikely that they will break the all-time record of 18,987. Strong demand will put upward pressure on prices, but another year of a double-digit increase is unlikely. Prices will be up by 7-8 percent in 2018.

The median sales price of a single-family home will be near $350,000 and the total value of residential sales will be $6.6 billion, well above the $5.9 billion in 2017. Finally, total residential real estate commissions will be close to $400 million up from $360 million in 2017.

Outlook: What Will the U.S. Real Estate Market Do in 2019?

We’ve passed the midpoint of 2018, which means some home buyers are starting to look ahead to next year. And a lot of them share the same questions: What will the real estate market be like in 2019? Will home prices keep rising, level off, or next year? Will it be a buyers’ or sellers’ market in 2019?

Tight supply and strong demand have boosted home prices in housing markets across the country, while presenting challenges for buyers. Mortgage rates rose steadily during the first part of 2018, and then leveled off during the early summer. That’s where we are now, as of July 2018. But what’s over the horizon? While no one can predict future housing conditions with complete accuracy, we can make a few educated guesses. Here are four of them.

1. We could see an increase in new-home construction.

We’ve seen a recent uptick in building permits nationwide, which could lead to a much-needed increase in new-home construction in 2019.

In a June 2018 report, the National Association of Home Builders stated: “Over the first four months of 2018, the total number of single-family permits issued nationwide reached 279,302. On a year-over-year basis, this is an 8.4% increase over the April 2017 level of 257,719.”

But there’s a pretty long lag time between the filing of a construction permit and the completion of the project. So the U.S. real estate market in 2019 will probably continue to suffer from supply shortages, with not enough homes listed for sale to satisfy demand from buyers. Which leads to item #2 below.

2. Most markets will still favor sellers over buyers.

Inventory shortages affected many housing markets across the country during 2017 and 2018. And this will likely continue, to some extent, in 2019 as well. Limited supply is also one of the reasons for prediction #4 below. An imbalanced supply-and-demand picture will continue to put upward pressure on home prices in 2019.

Of course, all of these trends can vary from one area to the next. Some real estate markets across the U.S. are more “balanced” than others, with enough supply to meet demand. Most cities, however, are experiencing low levels of inventory at present. The tightest markets are in the west — California, Washington and Oregon. But nearly every state is touched by this.

3. Mortgage rates could approach 5%, for a 30-year loan.

Here’s the short version: Mortgage rates are higher now than they were at the start of this year, and experts are predicting they’ll climb even higher by the end of 2018.

Here’s the back story: The average rate for a 30-year fixed mortgage hovered below 4% for much of 2017. Then, at the start of 2018, it began a steady upward climb that lasted for three months. When this article was published, on July 6, 2018, the average 30-year mortgage rate was 4.52%. That was an increase of 57 basis points (0.57%) from the first week of January.

So clearly, rates are higher now than at the start of the year. The question is, what might they do going forward? And what will the real estate market do in 2019 if mortgage rates climb even higher?

What might the real estate market do in 2019, in response to rising rates? Well, assuming that event actually happens, we could see a decline in home purchases in the months ahead. But we don’t expect it to have a major impact on real estate sales.

The economy is strong and employment is high, so there is steady demand for homes in most housing markets across the country. A modest rise in mortgage rates probably wouldn’t do much to dampen it.

4. Home prices will continue rising in most U.S. cities.

Given the current supply-and-demand situation, it appears likely that home prices in most U.S. cities will continue to rise throughout 2019. This would be the continuation of an ongoing trend, rather than a new development.

The median home price in the U.S. rose by 8.1% over the past year. They predicted that prices would rise by 6.5% over the next 12 months. This forecast was issued in July 2018 and therefore extends into the summer of 2019.

Of course, this too varies by region. Some cities might experience relatively small gains, while others could see a large jump in home prices. The biggest gains will likely be recorded in real estate markets with strong demand and short supply, like those in the Pacific Northwest and a few other areas.

Selling or Buying doesn’t have to be a huge undertaking, but it’s one where details really matter. When you’re working with real estate professional Carriene Porter of Precision Realty & Associates, you’re guaranteed to get the expertise and advice you need to Sell or Buy your home. If you prefer a more personal touch, CALL 801-809-9866 today. 

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