December 2016 metrics for the Palm Beach County Real Estate Market proved to fall in line with historical trends, and our expectations, with fewer gross number of sales, dollar volume, and pending transactions all falling 5% or more during the month.
There are some bright spots in the report – the median price for single-family homes in December traded for $315,000, capping off a year in which the price fluctuated between $300,000 and $317,000, marking a healthy 5% bump in ranges of prices over 2015.
But as for the blight in December’s market report, it’s really a factor of the time of year, and expectations of uncertainty coming down the pipeline in 2017. Take a look at these big reasons why December 2016 was so slow, and why we shouldn’t worry too much about it.
December is generally a slow month for home sales
We presented some historical data in the October Real Estate Market Report that showed the fourth quarter of just about any year is a slow one for single-family homes sold in Palm Beach County, and December 2016 proved no favoritism from history.
Rather, January through June of each year experiences the bulk of the activity that takes place throughout the year. Take a look at this chart:
So, we know that the August through December slumps are real, and in fact, December typically exhibits what economists call a “dead-cat bounce” – that is, a precipitous decline in the data (August through November), marked by a obvious correction (December), and another drop the next month (January).
However, from everything we can tell at Copeland & Co., January 2017 is going to a boon for the real estate market. Why? That’s next.
Mortgage Interest Rates are Rising
Following the election of Donald Trump in November, interest rates immediately started to rise, and have continued to rise. Some analysts in the industry are calling for mortgage interest rates to increase to the mid to high 4’s before years end. Why are rates increasing? Basically, stocks are continuing to increase as investors buy equity, creating an opposite effect on bond prices. Bond prices direct affect yields in opposite directions. So when bond prices fall, yields (mortgage rates, for example) rise.
Furthermore, the Feds have hinted that the economy is continuing to improve, with job growth steady and relative wages growing (albeit modestly). Many believe it’s high time for the Fed to increase interest rates in 2017 to fight off inflation.
The last factor is perhaps less clinical: investors are simply unsure about what kind of leader Trump will be. He’s unpredictable if nothing else, and that creates uncertainty in markets, the housing and mortgage markets included.
If rates rise by even a quarter of a percentage point, that can mean you’re spending much more money over the life of a 30-year loan – thousands and thousands of dollars more. But here’s the dirty little secret: sub-4% interest rates aren’t the norm, and in fact, it’s not something that great for the economy in the long term anyway. At some point, it’s natural and healthy that interest rates rise from the artificially stemmed rates we have now.
So, if you’ve made it this far, you must be wondering: Is now a good time to be buying or selling my home?
The short answer, is yes: now is the time to be doing both. If you have been thinking of selling your home for something different, now is the time before interest rates rise. Also, median prices are continuing to rise year-over-year, but at a steady pace…about 5% a year. You’re not priced out yet.
|SINGLE-FAMILY HOME||DECEMBER 2016||DECEMBER 2015||PERCENT CHANGE|
|Median Sales Price||$315,000||$300,000||5%|
|New Pending Sales||1,259||1,347||-6.5%|
*Data provided by Realtor’s Association of the Palm Beaches (RAPB)