I can hardly believe the new year is upon us. 2018 has passed in the blink of an eye!
In addition to many other things, the year brought changes in the state and local real estate market. The question I’m asked most often is, “What’s going to happen with the real estate market?” My answer is always the same: If I had a crystal ball, I’d be on a beach somewhere instead of standing at this open house. But, until I get that crystal ball, I’ll have to rely on expert economists to give me a glimpse into the future of my business.
In preparation for this article, I read up on several industry experts’ opinions. All I have to say is no wonder people are confused about the future. In one search of Inman, an online daily news source specifically for real estate, I found the following headlines side by side:
“Why the housing market will stay strong through 2021”
“Fannie Mae is pessimistic about the housing market in 2019”
When I read on, I found that despite the conflicting headlines, most of the economists and experts are saying the same thing.
Yes, the market is slowing. Prices (in 92104) in September are up a mere 5.8% from the same time in 2017. There’s no gloom and doom in that number; it just is not as impressive as the 2016 – 2017 growth of 14%. Leslie Appleton-Young, the chief economist of the California Association of Realtors, is forecasting a 3.1% increase in 2019 for California (North Park and SD Metro tend to be a bit higher).
Affordability is at 23%, which let’s face it, is a bummer. That means less than 1/4 of us can afford to buy a house in California. That said, affordability was at 12% in 2006 so when put into perspective, that 23% seems a bit more encouraging.
Inventory won’t keep up with demand. Unless everyone decides they had better hurry up and put their house on the market today, demand will continue to outpace inventory. There just isn’t enough housing to go around and we’re not building enough to keep up. Further, the overall economy is strong, unemployment is low, and millennials are just beginning to reach that home buying age which is predicted to add to the housing demand.
Interest rates are likely to go up, but Mike Fratantoni, Chief Economist of the Mortgage Bankers Association, predicts only to 5.1%. He also predicts they’ll stay there for the foreseeable future, meaning we’ve already seen the worst of the interest rate run-up. And 5.1% is still a historically low interest rate.
According to the experts, the market we have today is likely the market we’ll have for 2019. Prices will remain pretty steady and inventory will remain low, but market time will probably creep up a bit as we move toward a more balanced market. This means that just planting a sign in front of your house isn’t going to automatically generate multiple offers anymore, so ensuring you have a seasoned professional in your corner is going to be more crucial now than ever before.
What does this mean for you? In short, don’t let the headlines scare you away from making choices that are best for you and your loved ones. If it’s time to buy, buy. If it’s time to sell, sell. No crystal ball required.