New year, hot market! After a weaker than usual fall market of 2018, the 2019 market came in with a bang. Sales are robust, buyers are entering the market at a rapid pace (more on this later), days on market are short, and off-market activity has increased. So will this fast pace of the market continue throughout the year? What else do we anticipate for real estate in 2019? As I reviewed my 2018 real estate market predictions, I realized that although much has changed since early 2018, much more has stayed the same. So without further ado, here are my predictions for the 2019 real estate market.
AMAZON – HOW REAL IS THE HYPE?
Everyone is asking how much impact Amazon’s HQ2 will have on our area. While it is too early to tell exactly what the HQ2 future holds, we can tell you what we’ve seen so far. A few Amazon executives have already relocated to our area. We are working and have worked with several buyers from Seattle and have seen a couple of others bring offers on our listings. However, this first round of relocations has been limited and hasn’t impacted the market on a large scale.
We have also seen the Amazon effect in two other areas. First, renters (mostly millennials living in D.C., Arlington, and Alexandria) have decided they want to buy before the large relocations begin, causing a buyer influx in the market. The second effect is a significant increase in consumer confidence locally. While the political climate (which we will talk about later) is a bit more unpredictable with furloughs and unstable interest rates, the news of Amazon’s HQ2 has given both buyers and sellers confidence about our local real estate market — always a good thing. With the news of the New York location possibly being reconsidered, this means only good things for our area. You can read more about our predictions for Amazon’s HQ2 at thegoodhartgroup.com.
FEBRUARY 2019 UPDATE
This week, Amazon announced it’s halting plans for its other HQ2 site in Queens, N.Y., due to a lack of support from local government officials and the community. Amazon officials insist that pulling out of the Long Island City location does NOT mean they’re searching for a new HQ2 site. Its expansion plans will proceed focused on the National Landing site outside D.C. and Nashville hub locations. Amazon’s 17 other hubs will absorb the remaining jobs. However, local officials are not ruling out the possibility of more jobs at Amazon’s Crystal City location. Stephanie Landrum, president and CEO of the Alexandria Economic Development Partnership, said the state’s package was structured to allow for the possibility of up to 37,500 local Amazon jobs, an additional 50% on top of the planned 25,000. Of course, more area jobs means only good news for home values in our region.
MILLENNIALS: HIGH EXPECTATIONS
This resurgence of high-end millennial buyers who entered the market in 2018 also created demand for new construction and renovated homes. Why are these younger luxury buyers so interested in newer renovated properties, especially in our historic town? Many are dual-income families who do not have the time, vision, or cash to update an older home. But, these buyers still want their home to look good. We millennials have come of age in a visual society (thank you, Instagram and Pinterest) where we expect everything to look good, all the time.
This desire for new and improved homes has meant intense competition over the few available lots and small homes on lots over 5,000 square feet that could be expanded and renovated.
Unfortunately for many buyers looking for starter homes in our market, most single-family homes in close-in neighborhoods listed under $800,000 were scooped up in multiple offer situations by builders making all cash, no contingencies offers. As a result, many first and second time buyers were edged out of the running.
THE POLITICAL CLIMATE: IT’S ALL ABOUT POTRUXI
So, what in the heck is PoTruXi? ProTruXi is an abbreviation for the three people who will shape the course of the national economy this year.
Po = Jerome Powell, Chair of the Federal Reserve. What the Fed does over the next year will matter, big time. Interest rates have been especially volatile and quite a bit higher than they were at this time last year. It’s been predicted that rates would continue to rise throughout 2019, but we have seen the Fed pump the brakes a bit on their plans to raise rates. Rising interest rates play a huge role in the health of the real estate market as they can dramatically impact affordability. We anticipate rates to rise only subtly this year – versus the expectation at the end of 2018 that they would continue to rise aggressively. This is good news!
Tru = President Trump – and actually, Congress too. What happens here in D.C. has major ramifications for our economy and our real estate market, both nationally and locally. With a Democratic House of Representatives and a Republican Senate, the balance of power could provide to be a positive for the market. Why? Often it means that extremist policy on either side of the aisle is unlikely to be passed which improves consumer confidence. The big unknown locally is how we will weather another possible government shutdown. The January shutdown didn’t have a large impact on our market as a whole. However, if Trump and Congress continue their stalemate, it may cause more of a problem in the future.
Xi = China’s President Xi. The ability to strike a trade deal between the U.S. and China will also matter. The current turbulence around trade is fueling a lack of confidence and stock market volatility. Many U.S. companies are reliant on growth in China and tariffs on construction materials have made both renovating and building less affordable. We already have a chronic shortage of housing, especially affordable housing, so I would anticipate trade becoming more of a hot button issue as we get closer to elections.
THE FUTURE OF TECHNOLOGY
Last year, I predicted biometrics and artificial intelligence would make their appearance as new trends in the industry. Biometrics has become more mainstream in our everyday world as consumers embraced the iPhone X and Clear security at the airport. However, we still haven’t seen it become mainstream in the real estate world but the whispers continue that it is coming.
I also predicted artificial intelligence would become a part of the real estate space and there were significant strides in this arena in 2018, both inside and outside of real estate. On the real estate front, last year I referenced a futuristic sign that could interact with consumers that was “teased” at a conference I attended. In 2018, this sign was unveiled by Compass! In fact, the moment Robert Reffkin, the CEO of Compass, introduced the idea of the sign, a spark of interest about this growing company was ignited for our team. Of course, in June of 2018, we officially joined Compass and are so proud to be a part of a company that is advancing the world of real estate forward. With the hiring of Microsoft’s former Chief of Technology, Compass is also rolling out an artificial intelligence program that will improve both the consumer and agent experiences.
THE REAL STORY OF 2019
While all of these factors will play a role, the real story of 2019 market in the DC Metro areais historically low inventory which is impacting buyers and sellers of all agents in all price points. While our market has experienced low inventory for the last two or three years, we are seeing even more fierce competition and bidding wars already in 2019. After being strategically staged and marketed with a coming soon campaign, one of our listings in Rosemont recently had 13 offers and sold well over asking with no contingencies. This is great news for sellers and not-so-great news for buyers. It will be critical for buyers to work with an agent plugged into the market.
Because of this low inventory, we are seeing more off-market activity, with fewer homes going on the active market.
As a result, most active buyers aren’t even hearing about available homes until they are already under contract.
THE BOTTOM LINE – OUR MARKET IS STRONG
So, what does all of this mean when taken together? More buyers in the market and fewer sellers mean that we are likely going to be in a sellers’ market in 2019. That being said, sellers still need to stage and price their homes appropriately to generate interest in today’s highly visual world. When they do, they are being rewarded with excellent contracts. Sellers can capitalize on the stalemated interest rates and excitement over Amazon. Buyers can lock in still low rates before they rise.
All in all, the first half of 2019 is shaping up to be a strong market. We will be closely watching the political climate and the plans for Amazon’s expansion to see how things look for the second half of the year. In the meantime, if we can help you with your real estate goals in any way, please don’t hesitate to reach out. We are always here to help!
Allison Goodhart DuShuttle is with Compass Real Estate. Led by Sue & Allison Goodhart, they have been named a Top Agent by both Washingtonian and Northern Virginia magazines. Allison can be reached at 703-362-3221 or firstname.lastname@example.org.