Another year is winding down and it’s time to reflect on the real estate market’s last 12 months and see how it can help forecast the New Year.
Heading into 2016, most indicators pointed to a continuance of a hot market that favored sellers. The local economy was strong, unemployment was below 4%, and the number of homes available for sale remained low, which meant prices would continue to rise.
Despite the many signs that pointed to another hot year for sellers, 2016 proved to be only warm. This year, only 2 months posted year-over-year price increases of more than 5%. From 2012 through 2015, 46 of 48 months increased more that 5% and 35 of those months were over 10%.
Another area that cooled off was the price-to- list ratio. In 2015, 6 months had a ratio higher than 105%. This year, only 1 exceeded 105%.
Overall, inventory in 2016 was 3.5% higher than 2015, but unit sales were 7% lower. Usually more inventory leads to more sales, not less.
These data points show that 2016 proved to be a transitional year toward a more balanced market. Buyers gained more leverage and sellers had to settle for more moderate price appreciation.
I think 2017 will continue the trend towards a balanced market. I believe buyers will continue to focus more on value than availability and I think sellers will grow to accept slow price appreciation as the new norm.
Things to monitor in 2017 are interest rates and lending practices. Higher rates might temper sales, but easier lending procedures might offset it.
Things change quickly. I’ll be sure to keep you updated and offer my perspectives. Thank you for following this column.