What is the Forecast for Real Estate in 2019?
We're just starting the new year of 2019, and those of us thinking of buying and/or selling Scottsdale real estate this year are probably wondering what the new year will bring. This will give you an idea of what your current Scottsdale home might be worth and what you'll be paying for your next place.
What is the prediction for Scottsdale real estate prices?
The news is positive. Freddie Mac predicts housing prices will increase by 4.3 percent in 2019. That might seem low to you, but it is an average national increase, and more popular areas, like Scottsdale, could see higher numbers.
Since we're planning on moving in the future (probably next year), we are keeping a closer than normal eye on Scottsdale home prices. It's interesting how they're definitely increasing every time we check, and it seems like it's more than 4.3%.
For instance, NAR states that the national median price will increase to $266,800 in 2019. That is not the median price for Scottsdale! So a Scottsdale homeowner can't really go by national averages.
As a seller of Scottsdale real estate, you should have created equity depending on when you purchased your home and how long you've had it. That's good news for a seller of a Scottsdale home, but as a buyer, you will have to pay higher prices, unless you're downsizing.
Will inventory continue to decline?
National Association of Realtors (NAR) Chief Economist Lawrence Yun stated that 2017 was the best sales year in a decade, and 2018 was reduced by only 1.5%. He does predict that sales will continue near this or a lower level over the next couple of years. Freddie Mac predicts that 2019 home sales will increase by around 1%.
In reality, in Scottsdale and other areas, we are seeing multiple offers on homes that are priced correctly for their condition. Homes that are not selling with multiple offers are simply overpriced for their condition, location, etc.
Any time you have multiple offers, it means that there isn't enough good inventory available. Some buyers end up having to purchase a less attractive house and should have to pay less for that reason.
When inventory declines, prices go up. It's basic supply and demand.
What will happen with mortgage rates?
I'm still shocked at the current low mortgage rates. When I purchased my first house, rates were 10.5% and we didn't blink an eye. Of course, the prices were much lower. Scottsdale home prices are so high that few would be able to pay these prices with those kinds of rates.
It is predicted that the Federal Reserve will raise interest rates, so mortgage rates will rise in 2019. We might be getting back into the 5% area.
If you're considering buying a place this year, especially if you're a first-time buyer, you shouldn't wait for rates to rise. Higher rates mean you'll be qualified for a lower price. Small rate hikes don't always mean prices go lower, but they can make a difference in what you can afford.
First-time buyers will find it tougher to qualify
When first-time buyers can't make a purchase, it affects all real estate. It's like a domino effect - prior first-time buyers can't sell their homes to move up to their second homes, and the higher the price ranges, the lesser amount of buyers that will be available to purchase them.
Luxury homes have always faced a lower buyer pool, but when first-timers can't get into homeownership, it affects all price ranges. Unfortunately, builders aren't building homes that first-timers can afford because the profits aren't there for them.
Is there one age demographic that will be buying the most homes?
We always hear that the largest age group were the Baby Boomers, but Millennials are now pushing them aside (probably because the Boomers are aging and passing on). The Boomers will be the highest segment for adult communities, but not for real estate in general.
Millennials have become the largest group of homebuyers in the nation. They are reaching the age where they are settling down and will be the largest first-time buyer group. Unfortunately, they're also going to have a more difficult time because of the high prices they'll be facing.
There has been some talk about younger people wanting more urban lifestyles, but as Millennials get older and get married and start having families, many are moving out of big cities into the suburbs. The demand is there, but will the inventory of first-time homes be available?
Scottsdale home buying Millennials might have to start out in condominiums to get their foot in the homeownership door. It's not so easy for a first-time buyer to move out of a nice, updated apartment into a small home that needs repairs, but that's what we had to do when we were first-time buyers.
Times change and many Millennial buyers are shocked at what their affordability will get them. However, many times they can get a condo for less than what they're currently paying for rent with today's low-interest rates. If they don't mind doing some work, they could set themselves up for quick equity by purchasing a Scottsdale home that needs work.
Give us a call so we can help you with the 2019 Scottsdale real estate market
Call me at 480-877-1549. I have been through almost four decades of real estate cycles and recessions. Every year is different, and I can help you understand the current market we're in, and make the best decisions possible.