Residential Resale Market
Our local median sale price peaked in July then tapered off a bit in the 4th quarter, just as it did in both 2014 and 2015. We ended the year at slightly under $300,000, a 3% increase over last year. Prior to 2014, the peak season for real estate sales in our area (median price and total volume) occurred consistently between May and September. Perhaps due in part to the shortened summer break adopted by most of our local schools, our peak selling/buying season seems to have compressed a bit, now bunched between June and early August.
Sales of homes over $1,000,000 were flat in 2016 with a total of 94 closings, compared with 92 sales in 2015. Although our local economy heated up, global economic volatility and an uncertain political environment seem to have hit the luxury housing market hardest. That said, we have been told to expect an increase in the flow of high-end buyers in 2017 as new companies to our area, such as Tesla and Panasonic, move from the construction to the operational phase.
We continue to see many new homes coming out of the ground, but it is increasingly difficult to find options under $300,000. Several affordable new home developments currently in the planning & approval stages provide at least the potential for improvement in new home price points in the future. For the moment, most new home options are found within the confines of developments that were conceived in a different economic era. Damonte Ranch, Somersett and Wingfield Springs are good examples of this and they’re filling up. A lack of finished lot inventory could be a negative factor if you’re looking for a new home in 2017, particularly one close to town.
Summary & Predictions
Affordability continues to be a hot topic, as does the drop in median price and total number of sales in the 4th quarter of 2016. Add rising interest rates to the equation and it has become quite common to hear the question, “Are we in another bubble?” We think there are several indicators that point to the fact that this is simply not the case in our area, such as:
- Edawn’s Epic Report & jobs forecast: In late 2014, just after the Tesla announcement, Edawn produced their Epic Report. This report offered several jobs forecasts from conservative to optimistic; as of September 2016 we have exceeded their mid-range predictions by over 20%
- Rents are on the rise: While it’s difficult to reliably track rental rates for single family homes, the historical data for apartment rents is considered quite accurate. In a recent survey conducted by Johnson/Perkins/Griffin Real Estate Consulting, rental rates for 3-bedroom 2-bath apartments have risen by 20% between 2014 and 2016. This is certain to keep investors in the market
- Here come the Millennials: According to a recent Zillow report, 50 percent of today’s home buyers are under the age of 36. Millennials take a less traditional approach to home buying and they are more willing to consider renting and saving rather than “driving until they can afford it.” When Millennials do become homeowners, they tend to leapfrog the traditional “starter home” and jump into the higher end of the market by choosing in-town locations with higher prices. Ironically, downsizing baby boomers are competing for same inventory.
All things considered, we’re quite optimistic about the local real estate market. Qualified buyers will buy and properly priced homes will continue to sell in 2017.