Back in April of this year, we wrote about a looming recession that was inevitably on the way. Simply put – and much like a tornado watch – all the conditions were more than favorable for the development of a severe (and possibly long-term) economic downturn.
Now December, unfortunately, the economic storm is all too real and all too close.
Why? Well, the trade war and its tariffs, extreme national debt (that’s rising), inexplicable stock market values, lower corporate earnings, and attacks on large stalwarts of American industry are major indicators of what’s headed our way.
So how will all this affect the Tuscaloosa real estate market and what should buyers and sellers expect?
In that April article I posted here on RealBama, I outlined some solid advice for accomplishing your real estate deals both before and during a recession. But, most of all, we stressed that buyers and sellers should be well-prepared well in advance so your pocketbooks and wallets take as little of a hit as possible.
Now, with the recession all but certainly just around the corner, that’s more important than ever.
For starters, it’s important to know what is happening right now with home sales in the Tuscaloosa and Northport areas. ACRE, or the “Alabama Center for Real Estate” run by the University of Alabama’s Culverhouse School of Business, charts real estate performance in the area and issues monthly reports filled with valuable home data.
For the months of October and November (already-slow months of the year), the data shows the following insights:
- November 2018 sales down almost 11% over October 2018
- November 2018 sales down almost 7% over November 2017
- November 2018 median sales price of $175,875 up almost 13% over the 5-year average
- October 2018 sales down almost 11% versus September 2018
- October 2018 sales down almost 7% versus October 2017
As well, for the whole year this year, sales are now down 6%, inventory is down 5%, and the average home price is up 5%.
So, what’s all this data mean?
Well, for starters, it’s a local corroboration that the housing market is indeed heading into the same slowly-swirling drain that the overall economy is moving into. What’s more, as the economy gets worse, the housing slowdown will also be exacerbated. As a recent report from the Council on Foreign Relations puts it:
One metric that signaled trouble in the years leading up to the crisis was an expanding gap between the growth in home prices and household income…When income can’t keep pace with home prices, the latter must come down. Overleveraged home “owners” default on their mortgages, creating a housing glut that drags prices down further. Falling home values slow consumer spending, and therefore GDP growth, by way of the so-called wealth effect—that is, consumers cut spending when their assets fall in value.
For sellers who are considering a home sale or must sell soon, sooner may be much better than later. As consumer spending slows and confidence is sapped, home prices will fall and your home will take much longer to sell.
For buyers, mortgage interest rates have been rising, even coming close to 6% in some markets at one point this year. How significant has it been? As CNBC puts it:
A buyer with a $2,500 monthly housing budget lost nearly $30,000 in purchasing power this year, according to Redfin.
That’s especially problematic for first-time home buyers, young families, and buyers forced to move during bad economic times. As rates yo-yo up and down while banks try to spur on buyers, inventory will then inevitably drop too. In other words, rate help may come in very temporary spurts, so be alert.
The biggest messages for Tuscaloosa home buyers?
- Your home buying power is likely to be impacted (possibly in a major way) in 2019.
- Selling your home will be harder and take longer in 2019.
- You will pay more for a mortgage, but possibly less for a home – but with much fewer choices – 2019.
- Home inventories will drop even more as non-urgent sellers hold off on cashing out at a lower value.
- Acting sooner than later is very important to achieving value whether a seller or buyer
Have questions about any of this? Call me and I can guide you through the ins and outs of real estate in these soon-to-be troubling times.
I can also coordinate all your financing needs with trusted, chosen partners that give my clients the best chance at their home of choice.
Call 205-737-2983 or submit the form below: