What Will Happen With Home Sales This Year?

NOTICE: THIS POST REPRESENTS THE AUTHOR'S REASONED OPINION. IT DOES NOT REPRESENT THE OPINIONS OF O&AN, AND IN FACT MAY CONTRADICT THE OPINION OF OUT & ABOUT NASHVILLE'S EDITORIAL BOARD.

 

This is by far my most frequently asked question. I believe past experience predicts future performance, so I’ll share some statistics (ugh, math) to sum up what I think lies ahead of us (but like the weather, things are subject to sudden, unexpected changes).

Nationwide, the real estate market was bananas in 2018. Our beloved Nashville was one of the top markets in the country. I like to describe it as screaming down the road at 100 miles per hour. That’s fun, right? And a little scary too. The current outlook has us slowing to, let’s say, 80. That differential feels like slowing to a crawl, but it’s fast and will become the new normal pretty quickly.

The National Association of Realtors Economic and Housing Outlook for 2019 (published November 2018) summarizes the real estate market with the following nationwide statistics:

  • 2018 had 3.6% more new construction home sales than 2017
  • 2018 had 2.1% fewer existing home sales than 2017
  • 2018 overall was down 1.5%, a total decrease of 100,000 homes out of 6.0 million sold
  • Keep in mind that 2017 was the best year in a decade for home sales

If you wanted to buy a house in 2017, market conditions were excellent—lots of homes for sale, growing wages, and low interest rates. In 2018, we were very slightly less apt to buy. In addition to the impact to consumers, the smallest change in interest rates can cause investors to delay sale, giving fewer options for buyers.

So today, how much inventory is there? The perception is that we are changing from a seller’s market to a buyer’s. There is some truth in that, but I would categorize our status as leveling out, with more parity for both sides. Instead of sellers having the dominant hand, buyers are able to be a bit more choosy.

Last year in Davidson County, we experienced a 1.3% of homes sold, which amounts to 523 fewer homes than 2017. As those numbers went down, prices went up. The average purchase price of a home in Davidson County increased by about $19,000 (condos by about $15,000). So we are seeing fewer, but more expensive, homes sold, which is typical of a basic supply and demand economy. In addition, costs of materials are rising, resulting in the rise of new construction costs.

Take a deep breath because I have a few more important statistics coming now.

Another indication of the health of the housing market is the interest rate for a mortgage loan. According to FreddieMac, the current rate is 4.55%. This is one of the lowest levels in the past 50 years. The average rates for each decade from 1970-2018 were 8.9%, 12.7%, 8.12%, 6.29%, and 4.11%, respectively.

At the risk of sounding curmudgeonly, today’s kids have it easy. It is cheaper than ever to borrow money. Economists predict that rates will increase to about 5% by the end of the year, still lower than the past fifty years, this decade excepted. No matter your age, be responsible to only borrow what you can pay, and use a trusted lender.

Other indicators that influence home ownership include the unemployment rate, job openings, and rising wages. Unemployment is at a record low, while we are seeing more job openings, however wages are not rising quickly.

Circling back to the National Association of Realtors 2019 Outlook, it’s not very sexy. We are expected to grow modestly, getting back to 2017’s home sales of 6.1 million. 2020 does look better with a likely increase of 200,000 homes over projected 2019 levels. Values are still on the rise, but they also have slowed a little. The average price of a home in Nashville is $306,000 countywide, which is a 6% increase year-over-year.

April through June records the highest number of homes sold, which means there should be more homes on the market and more buyers competing to buy them. With rates low, inventory and values on the rise, the largest pool of buyers ever (Boomers, Gen X, and Millennials), now is an excellent time to stop paying the landlord’s mortgage and start paying your own.

With Amazon bringing 5,000 jobs to Nashville, AllianceBernstein bringing another 1,000, plus the organic job growth we are seeing from existing employers, I'm optimistic about our momentum.

While the outlook is good, there’s no Magic Eight Ball for the market. But, our region has sustained, for more than a year (or two), its position as one of the most desirable places to live, work, and play. I suspect we will get another chance to top that list in 2019.

 

CLICK HERE FOR MORE BY EMILY BENEDICT!

Emily Benedict is a Realtor working with buyers, sellers, investors, and developers throughout Middle Tennessee.

 

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