I don’t know about you, but I cannot believe 2018 is coming to an end; this year seems to have gone by so quickly. There were so many events this year that will define our world, our markets, and our lives. Whether it be natural disasters, political fiascos, or personal events, we will always remember 2018 as a year filled with memories; hopefully we will learn from the mistakes, strive to improve this planet and our lives, and continue to be kind human beings.
Real estate took many buyers and sellers on a ride this past year. Most markets, and definitely here in San Diego County, continued with price escalations and inventory shortages. Toward the end of the year we started to see many price adjustments, and the first signs of a changing market. 2019 promises to be an interesting year in real estate, and here are some of the projected highlights:
1. Price Corrections: I feel that prices will stop the crazy escalations and that we will continue to see slower price increases, or even a leveling off in some areas. In the third quarter of 2018 there were 35 states that experience slowdowns in appreciation, according to the Federal Housing Finance Agency (FHFA). there have been numerous price reductions, with many properties showing several prior to finally selling. This indication of the change from a seller’s to a buyer’s market will likely continue during 2019.
2. Inventory Improvement: Inventory should improve this year, as sellers who “missed the boat” on the highest sales prices may decide to sell. Once more inventory starts to hit the market, hopefully in the Spring/Summer months, it will spur others to sell and that will allow for downsizing/upgrading, which should make for a healthy market. Buyers will be in the driver’s seat as we move forward into this new market.
3. Higher Interest Rates: Interest rates should continue to rise, and have already risen to 5% this year. The Federal Reserve anticipates 2-3 rate hikes in the new year, to approximately 5.5%. Although this is not a staggering difference, it does make an increase in monthly payments, so buyers poised to purchase may want to consider doing so sooner rather than later.
4. New Construction: This sector has had challenges over the last several years, but some industry experts feel that new construction will rise in 2019. I feel it is truly area-dependent. Here in San Diego County there is not much buildable land, and combined with high construction costs and material shortages there may not be an overwhelming supply of new homes in 2019. In Carlsbad, for example, there are several new construction projects in the works, some large (Robertson Ranch) and a few smaller developments (like Treviso and Seascape, both in Southwest Carlsbad), but it is doubtful there will be too much more due to space and costs.
As always, we need to remember that the housing industry is a market. While now may not be a great time to purchase a flip property in many markets, 2019 will be a good year for buyers, and I believe they will have a bit more power in their pockets. Sellers should still fare well, although in most cases will not bring in the high numbers we saw at the start of 2018. We are still in a seller’s market, but there is definitely change coming and it is already apparent in some areas.
Happy holidays to you all and a very happy, safe and healthy New Year as well. If you have any real estate or real estate law questions please feel free to reach out to me: 760-310-9466, Rachel@LaMarRealEstate.org , @RachelLaMar_JD (Twitter)