While all real estate markets are local, recent data suggests that even the hottest US sellers’ markets are beginning to cool down. For companies that relocate employees, that should be mostly good news as we look at the real estate market in 2019.
“The signs are pointing to a market that’s shifting toward buyers,” says Danielle Hale, chief economist of realtor.com®. “But in most places, we’re still a long way from a full reversal.”
The real estate market has more than recovered from the 2008 economic crisis, and some coastal cities seemed to be entering bubble territory. The median home price in Manhattan rose from $400,000 in 2000 to $1.29m this year. During the same period, the median in San Francisco increased from $415,000 to $1.35m. Part of this growth is driven by booming local economies and constraints on new housing construction—particularly of the more affordable variety.
But even in the hottest, priciest markets, signs of a slowdown are unmistakable. Inventories and days on market are growing and price reductions are becoming common. Prices continue to increase in less frothy markets, but at a more measured pace.
“Affordability is becoming a major headache for homebuyers,” said Lawrence Yun, chief economist for the National Association of Realtors. “You are seeing home sales rising in Alabama, where things are affordable. But in places like California, people aren’t buying.”
What is Behind this Real Estate Trend?
Housing economists point to several factors behind this trend:
- Since the crash, housing prices have increased roughly twice as fast as incomes, and some potential buyers have reached the breaking point
- Mortgage rates, though still low by historical standards, continue to rise. Combined with high prices, they can push more homes out of reach
- Attractive, newer rental communities are presenting a more cost-effective alternative in some areas.
- Many first-time buyers carry substantial student loan debt that reduces the mortgage amount for which they can qualify.
- In areas with high home values and high property taxes, like the Northeast and California, the Tax Cuts and Jobs Act of 2017 significantly curtailed previous deductions that propelled those markets.
How the Real Estate Market in 2019 Affects Companies and Relocating Employees
For buyers, the good news is that the number of homes on the market is finally starting to rise. The selection is better and the pressure to make a quick offer—sometimes in a stressful, multiple-bid situation—is largely gone. In addition, more sellers are beginning to become more realistic in their pricing and willingness to negotiate.
Sellers who are relocating always face some pressure to achieve a sale at a reasonable price as rapidly as possible. With greater competition in the marketplace, it will be even more important than usual to encourage employees to price their homes realistically and to offer them incentives for doing so.
Decluttering, sprucing up and staging will be more important now, to make the home shine and stand out from the competition. TRC’s Discard and Donate program can help relocating employees remove clutter, contribute to charity and reduce the size of the outgoing shipment.
Of course, professional guidance is indispensable. TRC’s independent real estate network comprises local, relocation-oriented experts with experience in all kinds of markets. They have the expertise to work with employees, whether they are selling or buying, and help them to navigate this changing market successfully.