Market should remain active in 2019
Often in our business we are asked what the housing market is going to look like down the road. And while we don’t have a crystal ball, there is a wealth of historical data that helps indicate the impact of the interplaying dynamics of our overall economy, mortgage rates, population trends, and household growth on our housing supply, prices, and affordability.
In our recent Santa Fe Association of Realtors annual meeting, Paul C. Bishop, PhD, CBE, the vice president of research for the National Association of Realtors, shared an impressive amount of information to help understand the current housing climate, both locally and nationally, as we move into 2019. In 2018 our Santa Fe local unemployment rate is on parwith the national rate, both dropping below 4 percent, according to the Bureau of Labor Statistics. Tied with the overall national economic performance, the Fed’s plan to increase mortgage rates was quite the hot topic this last year. However, recent projections from the Wall Street Journal and National Association of Realtors is that the 30-year fixed-rate mortgage of approximately 4.6 percent in 2018, will be 5.2 percent in 2019 and 5.4 percent in 2020. This is a much more balanced estimate than rates rising to 6 percent quickly in 2019 that would potentially stall home purchases.
The U.S. Census Bureau helps identify population dynamics, notably that Santa Fe from 2011 to 2017 has had a natural increase in population from all three major indicators: natural increase, domestic net migration, and international migration for a net gain of 4,227 population and around 1,600 households. Stronger demand for housing has continued as residents from elsewhere relocate to Santa Fe and many people that love calling Santa Fe home choose to stay.
The National Association of Realtors has identified that the national benchmark of Months Supply of Existing Homes, an indicator of market demand, has stabilized from 2016 to 2018, with the national median days onmarket at 33 days. The situation in Santa Fe is that building permits obtained for new construction remain low and the available housing doesn’t meet the demand of the growing population. The Census Bureau counted just over 100 new permits received per year for the last seven years as compared to over 500 in 2005. Also, the cost of new construction of single-family homes is outpacing overall inflation and many builders are focusing on homes commissioned by customers rather than creating speculative builds. This has led to rising prices for new and resale housing due to lower available inventory.
At a national level, these dynamics softened the increase in existing home sales overall in 2018, compared to the steady rise experienced from 2014 to 2017. In Santa Fe, however, existing home sales continued to rise in 2018 and themedian home price was up 5.6 percent over 2017. As we look forward, it is anticipated that the direction of the national economy will continue to impact our housing market but local dynamics, population growth, and lower available housing inventory as well as the desirability of living in Santa Fe, are strong predictors of another active real-estate market in 2019.
We bring a new look to real estate to help integrate you within our community. A profound love and knowledge of Santa Fe combined with a fresh outlook, vitality, experience, local insight, and fun make Penelope (505-690-3751, pene[email protected] sothebyshomes.com) and Drew (505-4709194, drew.lam[email protected]byshomes.com) your trusted real-estate advisors.