Last summer’s housing market disappointed big time .It was supposed to have been the most competitive market ever but instead of continued bidding wars, particularly in the West, houses languished on the market and inventory jumped in former hot spots.
This fall, listing prices, the leading indicator of where prices are heading, slid and many industry experts started worrying about a soon-to-be realized déjà vu of the 2008 housing collapse.
Hold on. Economic conditions and lending practices in 2018 were not like conditions and practices in 2008. The overall strength of the economy is still strong, despite recent Wall Street volatility. (It’s hard to remember sometimes that Wall Street is NOT the economy and the economy is NOT Wall Street.) Unemployment levels are the lowest in 50 years and job growth is still happening. Wages are slowly rising, not as fast as price growth, but the growing trend toward slower price growth and rising wage growth may just help balance the two. And lending practices, completely unlike the free-for-all practices in 2007-2008, are and have been much more demanding and strict since the crash.
All of this being said, pending home sales in November, another key indicator for the housing market, dropped 7.7% year over year. November was the 11th consecutive month of decreases.
Of the four quarters of the country measured by the National Association of REALTORS® (NAR) to determine its Pending Home Sales Index of 101.4, the West was hit the hardest and the South was hit the least. Take a look:
- West – 87.2
- Midwest – 98.1
- Northeast – 95.1
- South – 115.7
According to NAR and every other industry expert, affordability has THE major culprit. Consumers were simply stretched beyond their financial abilities to buy a house. Throw in rising interest rates and consumers were hit with a double whammy in 2018.
But, hold on again. Here are two experts who offer rays of hope for both consumers AND agents in 2019.
Lawrence Yun, chief economist with NAR, said, “Home sales in 2018 look to close out the year with 5.3M home sales, which would be similar to that experienced in year 2000. But given the 17M more jobs now compared to those at the turn of this century, home sales are clearly underperforming today. That also means there is a steady longer-term growth potential (in home sales) for 2019.”
Brad Inman, among his year-end predictions for the 2019 housing market, said that he believes the market is slowing BUT is still forgiving AND that smart, savvy, agile agents and brokers will do just fine in a slower market. Inman also believes the Federal Reserve will “calm down” in terms of interest rates due to volatility, trade conflicts and the coming end of the stimulant package in 2019.
It may time for agents to put on their roller skates and put their dancing shoes in the closet for a while.