Every month the National Association of Realtors and the Commerce Department issue national reports on home sales, new homes sales and price trends. These are reported by national media outlets just like the Dow Jones or S&P 500. While securities and commodities are bought and sold on a national or international level on the New York Stock Exchange or the Chicago Mercantile Exchange, homes are bought and sold at a hyper-local neighborhood level.
The national real estate reports you hear on the radio or see on TV are averages of sales data from hundreds of multiple listing services and home builders across the nation. Trends in one market may not resemble trends in another market a thousand miles away. When local real estate markets do resemble each other, the cause is either that they are reacting to the same national factor, such as mortgage rates or consumer confidence, or they are experiencing an event like an inventory shortage or a price boom that is caused by similar forces at work simultaneously in different local markets.
Securities investors make decisions based on trends in a single stock market or several markets that directly impact each other, such as regional stock exchanges. They have a much simpler task than homeowners who are trying to decide whether this is a good time to sell and if so, at what price. Good current information on local real estate markets can be difficult to find and accessible only through expensive proprietary databases. Helping buyers and sellers understand what is happening at the metro or neighborhood level is one of the most important services real estate agents provide to their customers.
National “Market” and Real Estate Prices
So it’s fair to say that local real estate markets resemble each other because they are experiencing similar events but not because one directly impacts another, except migrations that drive consumers from one market to an adjoining one.
In 2018, many markets showed signs of moving from sellers’ to buyers’ markets. Sales slowed down to the point that total sales ended the year down about 5 percent from 2017. These markets had reached a tipping point where rising prices forced many first-time buyers out of the market and demand sagged. At the same time, higher prices motivated more owners to list their homes for sale. Slowly inventories have been rising and stabilizing, which reduces upward pressure on prices and slowed appreciation rates.
Changing Markets and Home Values
Annual price appreciation in these markets is slowing the national average appreciation rate from 6 to 7 percent to 4 to 5 percent annually. Most economists expect the average to continue to fall in 2019, to 3 to 4 percent. Though the national average prices are softening, many markets have not yet reached a tipping point.
A recent report by ATTOM Data Solutions found that in the 4th quarter of 2018, 272 of the 469 counties analyzed became more affordable. In many of the other 197 counties, a tipping point has not yet been reached. Inventories and prices may continue to grow in these counties.
>Is the Slowing “National Real Estate Market” Impacting the Values of Individual Homes?
The answer is that it depends on where you live. If you live in a market where inventories are declining, you will witness a slowing of price appreciation, but you should also expect an increase in sales as more homes become available to buy. In other markets where inventories are still falling or flat, prices will continue to rise until they hit a tipping point.
You can monitor your market’s progress from a seller to a buyer’s market by asking your real estate agent to track monthly changes in inventory levels closely, and also the time it takes to sell a house in your market. “Days on the market” should increase as more inventory becomes available.