Friday, December 21, 2018

Happy Holidays!

Wow, 2018 is nearly done and it was a good year for real estate locally. Some say it was flat or 'softer' to which I say, "yes it was." But frankly, that is good. A crazy market that puts too much favor on one side of the transaction is great for the favored but terrible for the 'unfavored' side.

2018 brought us a transition into a near neutral market. Sellers are still favored a bit on the entry level price point and buyers tend to hold an edge at the high end. In the majority middle from 90% of median to 120% of median, we seem to have a solid neutral market and that keeps things fair, and dials back the intensity in a positive way.

Looking ahead to 2019 is a challenge as some variables for the coming year are unpredictable. Will mortgage rates remain flat? The stock market may play a role in that equation. The last six months has had a flat and volatile stock market and that tends to bring some money into the mortgage side. Should that continue then rates should remain relatively stable in 2019 and that bodes well for real estate.

The economy continues to move forward at a very healthy clip and that means that buyers feel good about making big financial decision like buying a house or upgrading their current home. One of the issues we are facing that may be playing a role in the move from seller's market to neutral is the segment of homeowners that bought a house around 2012 when rates were in the middle 3's. Home values were depressed and they are sitting on a sizable tank of equity. This is the point that historically they make the move up to the house they wanted back then but couldn't afford. But now rates are little higher averaging closer to 5%. Now let's be VERY CLEAR, 5% is still a remarkably low rate for a mortgage, but it is also remarkably higher than 3.75%. I wonder how many of those sitting on that 3.5% to 3.75% mortgage from 2012 are saying they will just stay put. It seems from an anecdotal viewpoint, that the pace of listings is steady but the pace of buyers has slightly softened. Data seems to suggest that is the case at the moment but it is not conclusive.

Will those 2012 homeowners make the move in 2019? That is the big question. 7 years has long been the standard average move rate for a homeowner. If they do, the entry level may get some much needed relief and the middle market might get a shot in the arm, so to speak. This is the scenario that I feel is best for the local market. If we keep pushing positive volume without exerting excessive pressure in any one segment, that is a sustainable situation.

Whatever the the economics deliver for 2019, it should be a good healthy market for real estate. Getting a 30 year loan at 5% is still a great deal for the buyer.

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