The Everest Newsletter: Residential, January ’19 Edition
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Just the Peaks This newsletter, at a glance
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‘Next year’ is finally here, so what’s the state of real estate?
Take a look at the biggest headlines of 2018–and what they mean for 2019
The new year always brings renewed optimism in all areas of life, including hopes for a healthy real estate market. Investors, homebuyers and sellers active in 2018 saw some trying times. Now that 2019 is here, let’s take a walk on the sunny side of the street.
We’ve rounded up a few of the top real estate headlines from 2018. From supply shortages to sky-high list prices to Trump’s big takeover, the residential market buoyed over the past twelve months. The good news? 2019 is gearing up to be a very promising period for portfolio growth and investment opportunity.
The future is now
Having wrapped up their yearly analysis, researchers predict a fairly positive residential real estate forecast based on three key areas: housing inventory, federal taxes, and buyer demographics. We’ll begin by summing up the state of things at the end of 2018 before sharing our predictions for 2019.
The old: Interest rates were up, inventory was down
In 2018, hopeful home buyers were tested to the extreme. Mortgage rates peaked at 4.94% in November, then settled down at 4.75% by early December. Meanwhile, the housing market itself was scorching. A scarcity of homes resulted in soaring list prices and overnight appreciation. This led to countless bidding wars throughout the late spring and summer seasons (to the delight of eager sellers).
The new: Prices fall, more homes hit the market
Toward the end of 2018, we saw a slight surge in availability. In 2019, expect a 7% inventory growth, a gentle increase, but an increase nonetheless. In high-end metro markets, realtor.com predicts double-digit inventory gain. And while mortgage rates may remain above average, Trump’s economy promises a solid job market. So, who gets to play hardball? The answer is still up in the air. “More inventory for sellers means it’s not going to be as easy as it has been in past years,” says Danielle Hale of realtor.com. “It means they will have to think about the competition.”
The old: Trump’s revised tax code stirred up controversy
When Congress first announced 2018 tax changes, the industry reeled with excitement. Now that the standard deduction has doubled, Americans will keep more money in their pockets. That’s more cash to put toward a down payment, or to build equity in their current homes. On the other hand, the plan could challenge some luxury buyers.
“Homeowners can write off only up to $10,000 in property and either income or sales taxes. So folks in high-tax states like New Jersey, New York and California could wind up with less cash in their pockets this year,” says Clare Trapasso of realtor.com.
The new: Buyers and sellers anticipate good news in April
Since most people won’t file their returns for a few months, it’s difficult to say (with certainty) the impact the tax code will have on the real estate market. Experts say the best approach is to work with a good CPA and loan officer to assess your specific situation. While not everyone will benefit, the majority of taxpayers will see a refund boost, which is always good news.
The old: Millennials made their move
In 2018, millennials (born between 1981 and 1996) topped the real estate charts, holding a 45% share of all home mortgages compared to gen X at 37% and the boomers at 17%. Realtors definitely kept millennials on their radar, catering to their desires through various marketing and value-add strategies. While younger members just entered the workforce, others have established families and are still looking to buy.
The new: The surge continues through 2020
People tend to hype millennials as perpetual renters—young ‘uns who resist putting down roots due to their wanderlust or the less glamorous burden of student loans. But this isn’t exactly the case for the older set who are now entering their thirties. “They want to maintain a certain lifestyle, but they still see value in owning a home,” says Ali Wolf of Meyers Research. In 2019, insiders predict a large segment of millennials will be moving on from their starter homes. Having already built up a bit of equity, buyers returning to the market will wield some power, especially with more inventory available.
** Stats reported by realtor.com, Nov-Dec 2018
Everest says: exciting opportunities are on the horizon
Stay in touch for a prosperous 2019