National experts and economists are warning that the national real estate market may have peaked. This past week we attended the Keller Williams Mega Camp and spoke with top agents from all over the country to get their perspective as well. We’ll attempt to answer that question. “Has the National Real Estate Market Peaked?”
There are many forces that influence how well a market is doing, and in 2018 we’re seeing a new dynamic we’ve never seen before. Typically markets pull back due to economic factors like unemployment, interest rates, consumer confidence, etc. This year we’re seeing fewer sales nationwide due to lack of inventory.
Inventory is starting to rise again. So are interest rates which are affecting home affordability. Prices rose approximately 4-6% nationwide last year, while incomes rose 2-3%. In a fully indexed market, this isn’t sustainable. Keller Williams’ leadership mentioned we’re in a supply driven shift, which is unique because usually shifts in the market are determined by other factors we mentioned earlier.
So, the answer lies in what happens first? As we exit the supply driven stall, what wins out? Does consumer demand eat up the new inventory, or does interest rate hikes take its toll and dampen the ability of buyers to pay more?
Nobody knows the answer to this, but some experts are predicting lower sales due to a softening in some markets. Mortgage applications are down 3% last week nationwide and have been down for 4 straight weeks. Mortgage bankers are noticing a 17% decline in year over year mortgage applications.
The economy is on a roll. Unemployment is down to 3.9%, and demand for housing has been strong. We all know real estate is local. SW Florida can be influenced by other markets, but each market has its own strengths and weaknesses that can buck the national trend.
For instance, while the rest of Florida and the country were enjoying wild gains the past year, SW Florida did not. This might be good news for SW Florida because if it’s determined later that the national market got a little ahead of itself, we may be insulated from losses as we did not participate in all those gains. Lee County may have been a leading indicator.
Fundamentally it feels like a strong market nationally. If it is fully priced, the future depends on affordability and what happens with jobs, income, and interest rates. Price will move up or down depending on these other variables.
Locally, we’re subject to the same issues, and a few more. Throw in a possible hurricane, red tide, blue green algae, etc. and you see we have some wild cards. Personally, it feels like we too have a pretty good real estate market going right now. And the red tide and algae will soon pass. Because we didn’t participate in the big run-ups this past year, and because we have outside money that comes into SW Florida each season to invest in our market, we have potential for good times ahead.
The average Joe gets hurt the worst when the market shifts because outsiders price them out of the market. Locally incomes only rise so much, and yet local buyers must compete with snowbirds and investors to buy the area’s most affordable properties. It puts a strain on local buyers with limited income.
Regardless of what the national market does, Lee County has some really nice things going for it. And the negatives that are here today may be gone in a few months. We just need to see if sellers thinking of selling beat the interest rate hikes. Those that sell now may be in a favorable position, even if the market only stalls. It’s more fun to sell in a low inventory market than a neutral market.
Our website www.LeeCountyOnline.com has all the listings, and it’s updated instantly, so finding your SW Florida real estate bargain is a quick search away. One of our happy Ellis Team agents will be happy to answer your questions. To sell your home, call the Best Team in SW Florida. 239-489-4042. Ask for Brett or Sande Ellis Ext 4. And we’ll be happy to help you get Top Dollar and close in record time!