The unpredictable ebb and flow of the real estate market over the past decade seems to have stabilized a bit in recent years. For example, the years 2017 and 2018 finally displayed some similar trends when it came to home buying and selling. In general, the market favored sellers, as property prices continued their gradual rise and mortgage rates were at their highest since 2011. Despite some bad news, there is hope for some positive changes in 2019.
Along with the rest of the country, this area has been and will continue to be, a seller’s market for the immediate future. For the time being, there are fewer buyers’ deals to be had, with the exception of luxury properties in high-income areas. Since last year, however, the advantage has started to shift just a bit toward buyers of all price points.
General nationwide trends you can expect to see throughout 2019 real estate:
1) Mortgage rates will continue to increase.
After rising steadily over the past several years, rates hit a seven-year high in November 2018 and continue to rise. Currently, the rates are around 5% and could reach between 5.5% and 5.8% by the end of the year. As a result, buying power is down by around 10%. But as home sales continue to remain slow overall, buyers might have a chance to recover and face less competition from other buyers. On the other hand, most of the new inventory tends to be priced at mid- to higher-end levels, not entry-level, according to Danielle Hale of Realtor.com.
- The rise in average national income (now around 3%) is not growing fast enough to offset the cost of buying a new home, especially for first-time home buyers. Some monthly mortgage rates are as high as 8% per month.
- This year, overall home sales will decrease by about 2% as a result of higher mortgage rates.
2) More options for buyers, but at what long-term cost?
Inventory growth rates will remain around 7%, of which the majority of new construction will be luxury homes in high-end areas. Consequently, the market will continue to benefit sellers, but they may have to wait longer for their homes to sell, compared to the better sales trends in 2017 and 2018. This is a double-edged sword for many home buyers, because, while they’ll have more options available, they’ll also face higher home prices, thanks to the aforementioned mortgage rate increases.
Growth in inventory also may remain low, due to the fact that sellers, hesitant to risk buying a new property themselves and adjusting to the new higher mortgage rates, will postpone putting their own homes on the market.
According to this 2018 article: “Instead of selling, homeowners will continue to build equity as they make monthly payments on their existing mortgage and improve the property to increase its value, which will allow them to see greater profits when they decide to sell.”
3) Generational Differences
Millennials are purchasing more homes as first-time buyers, in spite of rising mortgage rates. They make up about 45% of mortgages (followed by Generation X at 37% and Baby Boomers at 17%).
This generation is poised to dominate the housing market for the next ten years. Yet it remains to be seen how well they can deal with higher monthly payments. This could easily reach an additional $100. While they may be able to afford the payments in the short term, they face the risk of a significant drop in their home’s value over time.
Another challenge for buyers and sellers, not to mention their agents, is that Millennials and Boomers often compete directly for the same properties. They usually have a certain set of amenities in mind, as well.
4) Marketing Trends
More innovative marketing strategies are needed, given the challenges of marketing to several generations. Social media is still important, and the strategies must take into account that the diversity in age usually requires different tactics.
This article notes several differences in how Millennials are approaching the buying process. In many cases, they have done a lot more research beforehand than the previous generation, so they already know the basics when visiting certain properties. When researching realtors, they’re seeking an expert to assist them with more complicated issues, like inspections, predicting future home values, and details about their new neighborhood.
5) Mixed results for sellers.
Above-median priced sellers, may find it will take longer to sell and require offering incentives, such as price cuts or other offerings. With less demand in the market, there will be fewer bidding wars and multiple offers.
6) Mixed results from the new tax plan.
The Tax Cuts and Job Act went into effect in January 2018. Some more good advice regarding the new tax laws may be found here.
So far, there have been no obvious indicators regarding the impact of the new tax code. People will be filing their taxes under the new laws by April 2019. Industry experts believe that the tax plan will benefit renters more than homeowners.
For most renters, the results will be good. Lower rates and a higher standard deduction should amount to lower tax bills. For homeowners, it’s a mixed bag. Some will benefit from lower rates and a higher standard deduction. However, many others will find limited itemized deductions and personal exemptions mean a higher tax bill.
7) For many, renting is the best option.
Today, renters have an advantage in areas where income is rising and/or unemployment rates are low. Overall, renting is more affordable than buying at the present time.
To date, Iowa City and its surrounding areas have reflected the basic trends observed throughout the rest of the country. The advantage of being a university town is that potential new residents are drawn to more than just the housing options. They look forward to the opportunity to be a part of a vibrant and diverse community.