December 2018 Real Estate Market Update
As you know the real estate market has been making headlines lately due to the slowing of new home sales, which fell 8.9% in October, falling four of the last five months.
In this post, I wanted to provide an overview of the national and local market as well as my point of view on the Atlanta market.
It may seem somewhat surprising that home sales are cooling given the strength of the economy, low unemployment, and growing household incomes. However, I believe there are some other factors that could be impacting the housing market.
Home Prices & mortgage rates
Median home sale prices in the US have increased 8% on a rolling 12-month basis, aided by the on-going low levels of inventory, which as of October was 3.1 months of supply nationally. Additionally, median household incomes have increased and stabilized back to pre-2008 levels, however, the growth has slowed and has not maintained the pace of the real estate market. Furthermore, rising mortgage interest rates, which are currently at a 5 year high, impacting buying power.
All this suggests that buyers are beginning to get a priced out of the market, anticipating a price correction or waiting to see if interest rates will pull back, which doesn’t seem likely.
Boomers looking to downsize are now competing with first time home buyers for smaller entry-level homes. Furthermore, buyers from Generation X are not buying the suburban houses that the boomers are leaving, choosing to live in more urban settings, further increasing buying competition. This competition along with the aforementioned low inventory continues to put pressure on pricing, keeping many buyers out of the market or cautious to overpaying.
Atlanta median home sale prices have increased 6% on a rolling 12-month basis and inventory levels remain low, at 3.1 months of supply, matching national averages. Atlanta seems to be lagging behind the rest of the country in a positive way.
In Atlanta, showings are up 15% from October 2017 but have been declining on a month by month basis in 2018. It appears that the Atlanta market has not reached the instability present in the rest of the country, but is still following the trajectory. Nevertheless, I view this slowdown as a positive for the real estate market, as it provides a rebalancing, making supply and demand more efficient as prices and supply adjust to the market.
All this said, there are still opportunities available if you know where to look, especially intown. Please reach out to me if you would like help tracking down and navigating some of these opportunities.