Are we heading for a price correction in 2019?
The single-family home real estate market for the month of January 2019 offered signals to that a slow-down is on its way in 2019.
The report, produced bi-monthly by the Florida Realtors Associations, provided one glaring indicator in the figure for Closed Sales for the month of January, totaling only 846, a (-23%) dip year-over-year from January 2018.
The number of closed sales is an important factor to watch, because it suggests whether demand from homebuyers is strengthening, or weakening. In this case, the demand from homebuyers coming out of the holiday season into the first month of the year, January, was a poor showing. Generally, the “peak season” for real estate transactions is the first and second quarters of the year – January through about May.
And looking ahead, we may see a poor showing for closed sales next month, too. New Pending Sales was 10% lower in January 2019 than it was a year ago.
Median Sales Price held strong at $340,000, an increase of about 4.6% year-over-year. As predicted on this blog about mid-2018, the $340k – $350k median sales price range is holding steady, and will probably continue through this year.
Another bright spot on the report was New Listings. Generally, when new listings increase, that’s a good sign of a healthy real estate market where new sellers are replenishing the inventory that recently went under contract and closed. For January 2019, new listings totaled 2,442, or about 4.2% more listings than this time last year.
That’s a good thing. That means that new sellers are participating in the market by putting their home up for sale to meet increased buyer demand. But there’s a rub.
With Month’s Supply of Inventory increasing almost 10% to 5.6 months versus 5.1 months for January 2018, the “seller’s market” strengthens. That’s no cause for worry itself, but when combined with what looks to be waning demand from buyers and insinuated by the precipitous drop in closed sales for January 2019, the gap between buyer demand and seller glut could grow, and that could mean a significant correction in home values.
How much of a correction, if we are right? That’s hard to say. But a correction in economic terms is defined as a negative price adjustment of around 10% or more.
With single-family homes’ median value hovering at $340,000, that correction may not mean much for the average homeowner in Palm Beach County. And for some buyers out there, it may even be a good thing – it will mean that the house they thought they couldn’t afford suddenly becomes affordable.
It’s also possible buyers are taking a break (after all, there was a 23% reduction in the number of closed sales for the month), which will allow prices to cool a bit. That’s not a terrible thing. Median home prices have appreciated more than 20% in the last three years alone.
January 2019 Single-Family Real Estate Market Stats
|SINGLE-FAMILY HOMES||JANUARY 2019||JANUARY 2018||PERCENT CHANGE|
|Median Sales Price||$340,000||$325,000||4.6%|
|New Pending Sales||1,511||1,668||-9.4%|