It’s New Year’s Eve 2019 as I write this, and I wanted to talk to you about my reflections on this year’s real estate market here in Tampa Bay, and my predictions for the 2020 real estate market.
2019 was a very interesting year for the real estate industry with a couple of surprises. The first one was interest rates going down! We thought that we saw the lowest interest rates possible back in 2016-2017, but they jumped at the beginning of 2019 and now at the end of 2019 going into 2020 have fallen again. We were seeing about 4.75% at the beginning of 2019 for a 30 year fixed mortgage and today rates are hovering at an average of about 3.8% for a 30-year fixed.
The second surprise was the inventory of homes for sale in Tampa Bay is ending the year down over 16% from this time a year ago. A year ago that didn’t seem possible given the fact that inventory was already at historic lows. We are at the lowest I’ve seen in 14 years of selling real estate.
So, What Does This Mean for 2020?
It’s simple supply and demand. The supply of homes is EXTREMELY low. What happens when supply is low? Prices go up, of course. Low supply combined with the fact that interest rates are great, means demand is high – so prices are climbing still. Prices have risen about 5% over last year and I expect about the same in 2020. The short answer is we are headed into a very strong sellers’ market in the Spring.
Expect Inventory to Go Even Lower
Inventory is lower: January 2018 had the lowest inventory of homes for sale since these records have been kept and after it is rose ever so slightly this past summer, we all assumed it would not go that low again. Well, we (and I) assumed wrong! When rates are lower, money is cheaper, and buyers can afford more which is a boost to the market.
Is Now the Time To Buy?
Now if you are a buyer, you may be thinking – but prices are high and keep climbing, should I wait to buy? The short answer is no, don’t wait to buy a home. Prices did increase 5% over last year in 2019. But if you lock in a sub-4% interest rate for a 30 year fixed mortgage, in time having that low interest rate will negate any savings you could potentially get by waiting for a lull in the real estate market which may never come. In fact, buy two homes with rates that low. If you can find a fixer upper that you can rent out and lock it in at a cheap interest rate and cash flow it – boom – you’re now a real estate investor. Look around, you’ll see lots of real estate agents doing this themselves. Best advice is buy in the Fall during the election when you may see others get nervous and take to the sidelines – there may be more inventory available at this point and less competition from other buyers.
When Should I Sell?
Again, because inventory is so low – if you are a seller, you are pretty golden. For now. However, let us not forget that we are going into an election year and if history repeats itself, we usually see things slow down a tad in the Fall around the election, and I think history will repeat itself. So, if you are a home seller it will be more important than ever to list early in 2020 so you can make the most money and watch your pricing and don’t get too over aggressive on it, because you could end up selling for even less. If you are going to sell your home in 2020 – your best bet is Spring/early Summer.
The economy seems to be booming. The stock market is at an all-time high. Unemployment is at an all-time low. In 2018 there was a lot of talk about an impending recession ahead, but it never happened and it appears to be nowhere in sight. Trade deals are underway, new jobs have been created and things are moving ahead well. People tend to buy when they feel good and the stock market is doing well.
I think we will continue to see bidding wars more than ever this Spring – which is great news for sellers but for buyers, well, lock in that low interest rate and get yourself a Realtor that is a shrewd negotiator and knows what an escalation clause is. You can still come out ahead in this too!
Last Thoughts for Buyers and Sellers
Locally on the ground what I am seeing and what statistics don’t show is that buyers are savvy and sellers are greedy – in some cases. Sellers are very aware that they are in a Seller’s market and are sometimes getting a little greedy and putting crazy high prices on homes. Sometimes those sellers don’t listen to their Realtor or look at the recent comparable sales in their neighborhood and just “want what they want” for their home and figure they will get it, because it’s a sellers market. Well, they are wrong.
Buyers have never been more savvy than they are now. They are armed with data from 3rd party real estate websites and they know what pricing should be. The ones that are overpriced or need a lot of work they either won’t go see, or they’ll look at them but won’t make offers. It’s still important in a seller’s market to be careful not to overprice your home, and make sure it’s in the best possible condition because you are still in competition with other homes on the market. Bottom line – listen to your Realtor’s pricing advice, after all, we do this for a living and we get paid by getting you the best price possible. But we know what’s the right price to list for and what price will mean you get zero showings.
I frequently tell my seller clients this when I am listing a home – especially if its not in a cookie cutter neighborhood. “I wish I had a crystal ball. I cannot tell you your home will definitely sell for X. But what I can do is look at the comparable sales and tell you a ballpark that I think it will sell within. Then we have to agree on a number, and see if buyers agree with our number. If we go a week or two and we have no showings, or very few showings and no offers, they do not agree with our number and we’ll need to make an adjustment. Sound fair?”
Some sellers will say “Well I’m not in a hurry to sell.” More time on market does NOT equal a higher sale price, usually it’s quite the opposite. Sellers get their highest price generally the first week or two the home is listed, if the listing price is good. It can even encourage a bidding war that drives pricing up.
Happy New Year! Cheers to 2020 and making all your real estate dreams come true! Questions? Reach out!