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2018 Annual Report for the IRES MLS Area
Dated: January 21 2019
Source: IRES MLS
While the 2017 housing market was marked by renewed optimism fueled by stock market strength, higher wages and a competitive environment for home sales, 2018 delivered a more seasoned prudence toward residential real estate. Home buyers, now steeped in several years of rising prices and low inventory, became more selective in their purchase choices as housing affordability achieved a ten-year low. Yet, the appetite for home buying remained strong enough to drive prices upward in virtually all markets across the country. In fact, national home prices have risen 53 percent from February 2012 to September 2018. That mark is a less dramatic but still sizable 40 percent increase when inflation is factored in. The national median household income was last reported with a year-over-year increase of 1.8 percent, while home prices have gone up 5.5 percent in roughly the same amount of time. That kind of gap can't be sustained indefinitely, but prices are still expected to rise in most areas, albeit at a much slower pace.
Pending sales decreased 3.1 percent, closing 2018 at 21,082. Closed sales were down 2.7 percent to finish the year at 21,209. A booming economy would seem to indicate more sales, but fewer homes to choose from coupled with lower affordability made it tougher for buyers in 2018.
Year-over-year, the number of homes available for sale was higher by 10.9 percent. There were 2,983 active listings at the end of 2018. New listings decreased by 0.3 percent to finish the year at 26,858.
Increases in sales prices occurred across homes of all sizes over the last year. In 2018, properties with 2 bedrooms or fewer saw the largest growth at 7.1 percent. The highest percent of original list price received at sale went to properties with 3 bedrooms at 99.8 percent.
Home prices were up compared to last year. The overall median sales price increased 5.6 percent to $380,000 for the year. Single Family home prices were up 5.3 percent compared to last year, and Townhouse/Condo home prices were up 8.9 percent.
Sellers received, on average, 99.6 percent of their original list price at sale, a year-over-year reduction of 0.1 percent. If demand shrinks in 2019, original list price received at sale could drop as well.
Consumer optimism has been tested by four interest rate hikes by the Federal Reserve in 2018. Meanwhile, GDP growth was at 4.2 percent in Q2 2018, dropped to 3.4 percent in Q3 2018 and is expected to be about 2.9 percent in Q4 2018 when figures are released.
Looking strictly at market fundamentals, recent Fed and GDP changes will not cause a dramatic shift away from the current state of the housing market. The booming sales at increased prices over the last several years may not be the same thrill ride to observe in 2019, but a long-awaited increase in inventory is something positive to consider, even if it arrives in the form of shrinking demand amidst rising mortgage rates.
The biggest potential problem for residential real estate in 2019 might be human psychology. A fear of buying at the height of the market could create home purchase delays by a large pool of potential first-time buyers, thus creating an environment of declining sales.
If the truth of a positive economic outlook coupled with responsible lending practices and more available homes for sale captures the collective American psyche, the most likely outcome for 2019 is market balance.