From Iowa to the coasts, the real estate market was shifting at the end of last year. Housing prices started to drop as interest rates started to climb. Should we expect more of the same in 2019? And who is going to buy a home? What are they looking for? Let’s take a closer look at some of these predicted 2019 real estate trends.
Millennials Will Buy More Homes
In 2017, the largest group of home buyers—36 percent—were 37 years old or younger. This was up from 34 percent the year before, and that number will likely hold steady or continue to rise. Although higher mortgage rates and high housing demand may make it difficult for first-time millennial home buyers, this Forbes article suggests that older millennials who are looking to upgrade to a new home will make up the majority of buyers in that age group this year. In 2017, 65 percent of those under age 38 were first-time home buyers, so we may see that percentage go down in the coming year.
Millennials and Baby Boomers Will Look for the Same Homes
Millennials aren’t into starter homes: 30 percent of them bought houses for $300,000 or more last year. That’s a huge increase from just 14 percent in 2014. CNBC reports that millennials tend to wait longer to buy a home than their parents did, and they look at it as a long-term decision: they want to buy a house that will serve their needs for several years, if not a lifetime, which may include room for a family. Meanwhile, baby boomers are looking to find slightly smaller homes where they can retire, which puts both generations in the market for the same type of home.
It’s essential to consider that starter homes are in short supply. There is more competition for them since they enter the market at a lower price point, and they are often purchased by investors looking to flip them or rent them.
Great Amenities Will Draw Buyers
This is part of the reason millennials and baby boomers are attracted to the same homes: great amenities. They want walkable neighborhoods, access to public transportation, and high-quality upgrades. Though millennials aren’t afraid of putting in a little DIY home improvement work, amenities that enhance their quality of life will continue to draw both generations. Millennials tend to value amenities over space.
The Suburbs Will Remain Attractive
The suburbs are changing: with greater development and focus on creating easy access to shopping and other conveniences, the suburbs offer the same appeal of a larger house for less money than you would find in the city, plus the convenience and walkability enjoyed by city dwellers. For commuters, public transportation may make it easier to get to their city-based jobs; for those who can work from home, there’s little reason to leave the suburbs at all when there are plenty of parks, restaurants, banks, cultural opportunities, and more available within a short walk or drive.
Mortgage Rates Will Rise
Mortgage rates rose steadily last year, and that trend will likely continue. Though they have dipped slightly from their seven-year high in November, the Forbes article referenced above features Zillow’s director of economic research suggesting rates will hit 5.8 percent, the worst “…since the dark days of 2008 when rates were racing downward in response to the housing crisis.”
People Will Seek Lower-Priced Markets
Smaller cities will continue to attract people who are tired of the higher-than-average housing costs in markets like California. Real estate prices in Iowa have been increasing in recent years, but they are still low compared to much of the rest of the country. Though Californians tend to move to nearby states like Nevada, Arizona, and Oregon when they leave their home state, we may see more people moving to Iowa this year to take advantage of our high-quality yet lower cost of living.
It Will Remain a Seller’s Market
It doesn’t look like that at first glance. Consider this:
- Interest rates are rising, making it less affordable to buy.
- Inventory is increasing, mostly due to that decreased demand.
- The highest inventory increases are in high-cost markets like Santa Clara, CA, Seattle, and Boston.
- Sellers may need to drop their asking price to attract a buyer.
- The Iowa Association of REALTORS indicates homes are less affordable now than in 2017.
Still, there has been considerable appreciation over the last few years. In Iowa City, homes have appreciated nearly 62 percent since the year 2000. If you’ve owned your home for a few years, you will likely be able to sell at a profit, even if you do have to lower your original asking price.
Social Media Will Reign
Today’s home buyers are more educated than ever. Millennials especially turn to social media to introduce them to the homes they may want to investigate. High-quality real estate photography is essential to showcase homes on these platforms. It’s an easy way for would-be buyers to stay tuned-in to real estate trends and availability, even if they’re not quite ready to buy.
Meanwhile, In Iowa:
PwC’s Emerging Trends in Real Estate ranks Des Moines as the number 55 real estate market to watch. (Dallas/Fort Worth, New York—Brooklyn, and Raleigh/Durham top the list for overall real estate prospects.) Our capital is expected to see higher-than-average population growth in 2019:
“The higher incomes combine well with the lower living costs and perceived high quality of life in the region. Single-family home affordability is among the best in the United States, with Des Moines and Omaha being particularly affordable.”
It will certainly be an interesting year in real estate, both in Iowa and across the nation. The slight shift in prices isn’t too damaging for those looking to sell this year, and it may be just enough to encourage more buyers—particularly with the rising cost of rent. We look forward to seeing if what happens in Iowa City and in the state as a whole is on trend with the rest of the country in 2019.
Tim Conroy specializes in residential real estate in the Iowa City Area. He enjoys working with clients and helping them discover Iowa City and the surrounding communities. He prides himself on customer service, creative marketing, and helping clients navigate transactions.