2019 Market Report
We don’t know about you, but 2018 flew by for us. The market was very active and, at times, very challenging. There are numerous predictions regarding the housing market 2019. Our primary goal is to provide you with the facts relevant to our particular market. Most people we encounter seem to be asking the same general questions – Will the market continue to favor sellers? Will we begin to see a more balanced market as we progress into a new year? What about interest rates? This market outlook will prepare you for what to expect in the 2019 local real estate market.
Kippliner reported in December that the Federal Reserve adjusted it’s projected number of rate hikes in 2019 from 3 down to 2. Even so, they are projecting the long term interest rates to remain low after 2019 hikes. By the end of 2019, this Kipplinger economist expects the 30-year fixed- rate to hover at 5%, and the 15-year fixed-rate to be 4.4%.
One of the biggest challenges facing prospective homebuyers continues to be our nation’s housing shortage. Our market continues to favor sellers. Absorption rate acts as an indicator of buyer demand versus housing inventory. Less than 6 months of supply is considered a seller’s market, while greater than 6 months of supply is considered a buyer’s market.
We are currently seeing similar inventory compared to this time last year. Inventory levels vary by type and price of real estate. Total inventory in Bozeman city limits and Belgrade is under 3 months. The greater Bozeman area is under 4 months and Manhattan is under 5 months. However, after the past couple years of declining supply, the supply steadily increased during 2018. As a result, seller’s have experienced longer days on the market than expected.
This trend will likely continue. As we reported in our 2018 market report, millennials are leading the home buying trend. The median age for first-time home buyers is between 32 and 33 This age group represents nearly 4.4 million people. The next group to enter the home buying market are 26- and 27-year-olds, representing 4.8 million people. As this group become home buyers, they will be competing for the same inventory as the older millenials. If they buy at similar rates, it is projected that “we could see an extraordinary housing bull market” by 2022, according to Josh Steiner, a Hedgeye Housing analyst.
Can our local market meet this demand? Builders continue to face a skilled laborer shortage and some instability with supplies. As reported by Professional Warranty Service Corporation, “new tariffs on imports from China include around 600 products related to home construction, representing roughly $10 billion in goods.” Land availability and the cost of development will also continue to impact builders. In our market, with the exception of Manhattan, land supply hit a 3 year low at the beginning of 2018. The good news is it has slowly risen through 2018. If builders can successfully manage the other challenges, they can continue to fill some of the valley’s housing demand. With the demand expected by the millenials over the next few years, we expect a very strong outlook for our local builders.
Locally, Belgrade has experienced a 191% growth in new construction in 2018. This new construction is providing more affordable housing compared to the Bozeman market. It is especially helping meet the demand for the first and second time home buyers.
If you are a seller, the good news is you are still in the driver’s seat. If you are planning to sell, be sure to invest in professional advice that knows the market and considers all relevant factors for your particular property. If you are a buyer, do not despair. While challenging to purchase, especially with the lowest inventory between now and June, the inventory historically rises through the summer. It is especially important to hire a competent real estate professional that has the skill and knowledge to navigate the challenges faced by buyers in our quickly moving market.
By keeping up-to-date with market trends and economic conditions, both buyers and sellers can prepare themselves for the 2019 housing market in order to make the best economic and personal decisions.
If you are considering buying or selling in 2019, get up to date information or schedule a free home consultation.