The most frequently asked question in real estate is arguably “How’s the market?” As we enter a new year, that question is being asked more frequently by homeowners, buyers, sellers, investors, and others who are making real estate decisions; they all want to know what’s happening now and what it means for the rest of 2019.
HouseCanary identified five trends that are currently visible in the real estate market and that we believe will continue to influence home values throughout the year. Here’s what we think is going to be important to consider when making real estate decisions in the new year.
1. Peaks and valleys: Where have we seen the most change in real estate?
We evaluated markets that experienced at least a 20% drop during the Great Recession, measured from the highest point between 2005 and 2010 to the next lowest point.
Post-recession, some markets have recovered more quickly than others. The five MSAs with the lowest growth rate since the recession include:
- Bakersfield-Delano, California
- Cape Coral-Fort Myers, Florida
- Crestview-Fort Walton Beach-Destin, Florida
- Naples-Marco Island, Florida
- Yuma, Arizona
These markets might not be showing accelerated home price growth, but at least they are still growing. The five least-recovered markets since 2008 include:
- Atlantic City-Hammonton, New Jersey
- Lexington Park, Maryland
- New Haven-Milford, Connecticut
- Valdosta, Georgia
- Pineville-Millville-Bridgeton, New Jersey
Other parts of the country showed significantly more robust recovery rates, including three metro areas in Michigan. The five MSAs with the highest growth rate since the recession include:
- Flint, Michigan
- Greeley, Colorado
- Jackson, Michigan
- Muskegon-Norton Shores, Michigan
- San Jose-Sunnyvale-Santa Clara, California
Greeley, Muskegon-Norton Shores, and San Jose-Sunnyvale-Santa Clara have all exceeded 2008-2010 real estate prices; Greeley and the San Jose markets have grown by 50% since the 2008-2010 peaks.
Not surprisingly, Greeley and San Jose were also among the five most-recovered markets since 2008-2010:
- Bellingham, Washington
- Greeley, Colorado
- Ogden-Clearfield, Utah
- Salt Lake City, Utah
- San Jose-Sunnyvale-Santa Clara, California
2. Softening luxury market: Prices are plateauing and dipping in many areas
The real estate market is growing across the country in terms of home price, but a HouseCanary analysis found that the luxury market growth rate is at least half the non-luxury growth rate in a whopping 97% of metropolitan statistical areas (MSAs), indicating clear softening at the high end of the market nationwide.
Nationally, the luxury market growth rate is 1.83% less than that of the non-luxury market. There are some markets where the luxury growth rate is even lower — 5% less than the non-luxury growth rate. Some of those MSAs include:
- Las Vegas
- Orlando, Florida
- Stockton, California
Nearly one-third of the bottom 10 percent of luxury markets are located in Florida.
Of course, some MSAs are still experiencing a robust luxury market, but those comprise only 1% of MSAs nationally. Some MSAs with luxury market growth rates that surpass the non-luxury market include Naples, Florida, and Shreveport, Louisiana. And in 25% of markets, the luxury market growth rate is within 1% of the non-luxury growth rate, including:
- Albany, New York
- Virginia Beach, Virginia
- Hilton Head, South Carolina
- El Paso, Texas
- Boulder, Colorado
3. Rural vs. urban price growth
We all know home prices have been growing over the past several years, but is that price growth more developed in some areas than others? HouseCanary analyzed price growth in urban and rural areas (by census tract) and found that urban census tracts have had more robust price growth than rural tracts, 5.4% growth compared to 4% growth.
That said, when we look at the top 100 largest rural and non-rural census tracts by land area or population, rural tracts are closing the gap with 4.9% growth in rural tracts by land area compared to 5.6% growth in urban tracts. Rural tracts by population in the top 100 showed 4.6% growth.
And there’s also some variance state by state. The top five highest-growth states with MSAs in rural areas were:
- Nevada (9.4%)
- Washington (7.6%)
- Florida (7.3%)
- Utah (6.8%)
- Arizona (6.7%)
In terms of the lowest-growth states with MSAs in rural areas, the bottom five included:
- Alaska (0.2%)
- Louisiana (0.7%)
- North Dakota (0.7%)
- New Jersey (1.3%)
- Illinois (1.4%)
Nevada, Washington, and Utah were also in the top five highest-growth states with MSAs in urban areas:
- Nevada (11.8%)
- Idaho (9.0%)
- Washington (7.9%)
- Michigan (7.7%)
- Utah (7.45%)
And the lowest-growth states with MSAs in urban areas included:
- Alaska (-0.1%)
- New York (1.8%)
- West Virginia (2.0%)
- Louisiana (2.6%)
- Mississippi (2.8%)
So whether you’re moving to the city or the country, Nevada, Washington, and Utah are popular choices — but Alaska and Louisiana are not.
4. Pent-up demand doesn’t seem to be influencing price growth
The tenure of homeownership has been getting longer in many parts of the country as homeowners stay in their current homes longer before moving on to their next homes. We examined whether the median years of ownership in a market was influencing price growth at all, and we found that there wasn’t a strong correlation between the length of homeownership and price growth.
The markets with the largest price growth over the past year were all in Nevada; Pahrump, Fernley, and Las Vegas-Henderson-Paradise all showed double-digit price growth year-over year, followed by Aberdeen, Washington, and Okeechobee, Florida:
- Pahrump, Nevada: 13.73% price growth
- Fernley, Nevada: 13.28% price growth
- Las Vegas-Henderson-Paradise: 12.24% price growth
- Aberdeen, Washington: 11.98% price growth
- Okeechobee, Florida: 11.46% price growth
However, the median years of ownership were all in the single digits for these top five markets:
- Pahrump, Nevada: 3.90 median years of ownership
- Fernley, Nevada: 4.41 median years of ownership
- Las Vegas-Henderson-Paradise: 5.32 median years of ownership
- Aberdeen, Washington: 4.83 median years of ownership
- Okeechobee, Florida: 6.64 median years of ownership
There were some markets where the median years of ownership was barely over two years, but none of them showed significant year-over-year price growth:
- Winona, Minnesota: 2.49 median years of ownership, 2.48% price growth
- Bellefontaine, Ohio: 2.61 median years of ownership, 0.98% price growth
- Lincoln, Illinois: 2.87 median years of ownership, 1.55% price growth
- Anniston-Oxford-Jacksonville, Alabama: 2.95 median years of ownership, 5.6% price growth
And in markets where the median years of homeownership was greater than 11 years, price growth did not seem to be high, either; one MSA even showed a slight decline in year-over-year prices.
- Salem, Ohio: 13.98 median years of ownership, 3.75% price growth
- Washington, North Carolina: 13.66 median years of ownership, 2.71% price growth
- Elkins, West Virginia: 13.31 median years of ownership, 0.55% price growth
- Rolla, Missouri: 13.15 median years of ownership, 2.03% price growth
- Glasgow, Kentucky: 11.25 median years of ownership, -0.24% price growth
5. Demand at the lower end of the market is pushing up prices
The high demand for entry-level housing (and low supply of entry-level homes) is pushing up prices in some areas, we found. HouseCanary examined the lowest 20% of properties by median price in 2018 and discovered that 61 MSAs showed double-digit price growth year-over-year at the lower end of the market. MSAs that had the highest price growth in this segment of the market included:
- Aberdeen, Washington (21.26%)
- Las Vegas (18.04%)
- Fernley, Nevada (16.02%)
- Okeechobee, Florida (15.81%)
- Pullman, Washington (15.11%)
Price growth increased by at least 3% year-over-year at the low end in 465 markets analyzed — but there were some markets that saw price declines at the low end of the market.
- Vernon, Texas (-12.86%)
- Bastrop, Louisiana (-6.27%)
- Kinston, North Carolina (-5.69%)
- Grants, New Mexico (-5.26%)
- Cornelia, Georgia (-4.39%)
All told, 71 markets showed price declines at the low end of the market; 29 of those price declining markets are in the Southeast, and 18 are in the Midwest.