This month I’m taking a little different approach to my market summary and that is because I have some really great information to share with you. In October, I attended the annual MetroTex Market Forecast. This is an event where our local board of realtors brings nationally known economists to speak, giving us an overview of our local and national economies, as well as a forecast of what is to come for the real estate market. This month, I will share my notes from that forecast and try to tie that information to what is happening in our neighborhood.
~ Buyer demand is waning and pending home sales are trending down
~ Overall, the economy is good and wages are finally starting to pick up
~ 2019 and 2020 both look fine in terms of economic outlook (only question here are the effects that tariffs will have on businesses and employment)
~ Economic stability in 2021 could be questionable
~ US is enjoying record wealth, but it is not evenly distributed - not even close
~ 18 million jobs have been added in the US since 2010
~ Higher mortgage rates + higher home prices = buyers being priced out of the market
~ Interest rates will continue to rise and there will likely be one more rate increase before year-end. He’s predicting 5 percent by year-end 2018. Millennials believe 5 percent is still historically low - this is our largest segment of home buyers.
~ Inflation is rising so lenders must charge more for the money that they lend.
~ Home ownership rates are still relatively low compared to historic levels
Prediction of 8 percent price appreciation over the next two years - so approximately 4 percent per year for 2019 and 2020.
~ The real estate market is currently in a period of adjustment. Buyers will be back, but rates and the number of homes for sale (inventory) will both continue to increase, which will keep price appreciation in check.
~ Debt is the biggest headwind of the national economy.
~ Lack of new construction is the biggest headwind for the real estate market
~ Texas population and job growth still leads the nation, but both have been slowing since 2016
Dr. James Gaines of the Texas A&M Real Estate Research Center and Steve Brown, the real estate editor for the Dallas Morning News both spoke after Dr. Yun and pretty much echoed his thoughts and analysis. In fact, Steve Brown wrote an article on Friday, October 12th citing a different source with a similar price appreciation prediction for 2019.
So let’s turn our focus to what happened in Lochwood in September and October 2018. Overall, home sale activity was good. Thirteen home sales closed, The median sale price was $363,500 with 48 days on market compared to $335,000 and 16 days on market last year. The overall supply/inventory of homes for buyers to choose from held near three months, which is about two months more inventory than the same time last year. As of the writing of this letter, there were 4 homes pending sale and 32 homes actively being marketed for sale in the MLS. Click here to see which homes sold in September and October.
Activity in Lochwood is definitely tracking what the experts are seeing at the national level. Our days on market has steadily increased since May of this year and fewer sellers have received multiple offers on their homes. This coincides with the statement that buyer demand is waning. Because there are fewer buyers in the market and homes listed for sale are accumulating more days on market before going under contract, we are seeing our inventory increase. In Lochwood, inventory has steadily risen from 1.2 months in July of 2017 to 3.7 months as of October 2018.
Now, I know you want me to get into price but truthfully, price is very property specific. What I can tell you is that the sellers who I have worked with in 2018, who have priced their homes just below the maximum price that I believed their home could sell for, put their homes under contract much more quickly than the sellers who priced their home at the high end of the price range for their specific property. The clients I have worked with in 2018, and even some at the end of 2017, who priced their homes at the high end of their price range ended up doing one or more price reductions before attracting a buyer who wanted to make an offer on the home. This coincides with 2018 price appreciation dropping to five percent from 10+ percent annual appreciation in 2014, 2015 and 2016.
In conclusion, do not walk away from this article thinking that the sky is falling. The sky is not falling. Essentially, the market was going about 150 miles per hour for the past couple of years, and now we’re going about 75 miles per hour, which is still a pretty good clip! Buyers will be back and it is always a good time to sell your home if it is priced appropriately.
I have a few more houses I will be putting on the market before year-end and I am talking with quite a few sellers who are preparing their homes now for the spring 2019 market. How can I help you?