2018 Real Estate Market Trends
What happened in 2018? Overall it appeared to prove to be another big year for the US housing market and commercial property sector. There was plenty of capital. Big deals were done. Overall housing prices and rents were strong.
‘The One’ dwarfed all other home listings in the United States in 2018, with a bold asking price of $500M. Amazon’s HQ2 hype remains overshadowed by Google, who holds the title to the first and second most expensive purchase of the year. A $2.4B acquisition in New York, and $1B purchase in Mountain View, California.
While many industry professionals may have experienced their best year ever, the data shows a notable downturn creeping into the data as well. Q3 2018 figures from ATTOM Data Solutions shows US single family homes and condo prices rose just 1%, a two year low. Home prices in 69% of housing markets still remained above pre-recession levels as of the third quarter. Homeowners have also been staying in their homes much longer, with a new all time record average of 8.23 years. Distressed sales rose in the second half of the year. While all cash purchases continued to slide to just 27% of the market.
In New York, some builders have been cutting attractive deals to lure buyers to numerous unsold condos. Landlords have also made sizable concessions to sign new leases. Manhattan’s retail real estate has withered, falling some 25%.
Toll Brothers reports the lowest number of home orders in four years. The National Association of Realtors reports pending homes sales fell 2.6% in the third quarter. The 10th consecutive month of declines.
The Outlook for 2019
While many commentators and industry professionals are 100% bullish on the strength and forecast of the market, the above data seems to show contradictory real estate market trends in motion.
If there is one thing almost everyone agrees on, it is that mortgage interest rates will continue to creep up. While still at incredible lows, this may affect the buying power of some retail home buyers. Especially if home prices continue to rise as well.
Zillow forecasts that national median home prices will continue to rise by 6.4% by October 2019. Though this is likely a well averaged balance between a diverging group of markets. The hard data suggests that some mature markets have already peaked in this cycle, and have been trying to correct for the past year. Yet, other cities appear to still be in growth mode.
Influential Factors in Play
As always, there are a wide variety of factors which can continue to shape real estate market trends.
This year they most notably include:
- The chances of a new recession on the horizon
- Stock market volatility
- Politics and the ramp up for the next election
- International trade wars
- Wage growth
- New real estate technology and Fintech
- Access to credit and real estate capital
Emerging Trends to Watch
The stampede effect is the biggest trend to watch out for in 2019. As more negative data comes out about certain markets, we’ll no doubt see the herd fall over each other to tackle new markets with more growth and better yields.
Most of this revolves around affordability, and flight from higher cost markets. Secondary and tertiary cities should see the most action in 2019. For example; developers moving from Dallas to Austin. From Manhattan to Queens. From Miami to Jacksonville. From San Francisco to the Inland Empire.
We haven’t yet seen as much building and demand blow up in the hot suburban boom and bust markets of the last peak and bubble. The next three years may see those areas rebound as builders and buyers crave affordability and more equity appreciation. Following this we may see more condo conversions, and reverse conversions as different markets boom and peak.
Customer service is also likely to be one of the most sizable differentiators in the next couple of years. Especially when it comes to rentals. Consumers are savvier than ever before. While they still trust online reviews, expect those to be most influential in where they decide to rent, regardless of price. Amenities and smart homes may be big factors as well, providing no new major financial crisis comes to town.
Private lending and nonbank lenders are another big trend which has emerged, and may only gain steam in 2019 as investors look for alternatives.
Important Moves to Make in 2019
For real estate professionals from fund managers to house flippers to developers, there are several shared moves which standout all can and should be using for their advantage ahead.
Recapitalize
With such uncertainty in markets and what’s ahead in the economy it is going to pay to have cash. That may mean raising more money now while it is easy. It could be refinancing and restructuring debt to release more pent up capital for deployment. Or fast tracking projects for financing now, rather than later, when terms may not be as attractive.
Establish New Market Presences
Much of the industry is going to be transitioning over the next 12 to 34 months. Often to new locations. It can be far easier and more profitable if efforts are made now to get in, start building a brand presence and laying the foundation in new destinations or niches.
Build a Strong Network
We’ll continue to see a sizable divergence between the small players and the large ones. There is room for innovation and disruption. Yet, how much is really accomplished will definitely depend on the strength of networks. Press contacts, local vendors and contractors, finance partners, and emerging tech platforms are likely all part of this.
Make Customer Service a Priority
Great service and customer satisfaction just doesn’t happen by itself. It takes making it a priority, sharing those goals with the entire team, managing it monthly, and devoting a budget to it.
Content, Content, Content
Quality content will continue to be a differentiator in who stands out and keeps their numbers up. It’s all about achieving the know you, like you, trust you trifecta. Whether it is video, ad content or web copy, those with the best will shine, and it will show in their accounts.
2018 has proven to be a pivotal year in the US property market. Many enjoyed a huge windfall. Others have begun encountering more headwinds, and more normalization in their local markets. Looking ahead to real estate market trends in 2019, there are plenty of opportunities, though expect bigger gaps in how different cities and industry firms perform.
