The US property market in 2019 looks to continue the trend for high prices, with asking prices almost 50% higher than ten years ago – but if you know where to look, and just as importantly, what type of property to look for, you’ll be able to find bargains (and it’s all thanks to lower sales volumes – we’ll show you where).
Property sales volumes slowing
According to the National Association of Realtors the price of US property is up, but the number of sales being made is down. Overall, the number of sales of US property made in December 2018 decreased by 10.3%, compared to the number of sales made in December 2017.
Higher prices across the board mean fewer people are able to buy. This is a pattern we’ve seen manifest in most corners of the USA. For example, in the northeast, the median price has shot up by 8.2% in the last year to $283,400. Incidentally, the number of sales in the popular region, which includes New England and New York have fallen by 6.8% on their 2017 levels.
Also, in the South, where the median price is currently $224,300, sales fell by 5.4% over the course of the year.
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Additionally, in the West, in December 2018, 15% fewer sales were made than in December 2017. The median price in the West of the USA is currently $374,400.
Now to the Midwest, where the number of sales fell by 11.2%, but the median price of property remains at $191,300, the same as last year.
There are two major factors thought to be responsible for this slowdown in the number of sales being made in the US property market…
1 – Higher home values
Over the course of 2018, home prices grew to the highest level the country has ever seen. Therefore, the price of the median home in the USA now costs 1.5 times what it did at the height of the recession. This marks an increase in US property prices of 49.8% since 2008. While there are still affordable US properties to be found, they’re not quite as plentiful as they once were.
2 – Increased mortgage rates
For the last five years, US mortgage rate levels have been at historically low levels. However, in 2018 we saw them rise to their highest point in seven years. Experts predict that mortgage rates are set to continue rising and are likely to hit 5.5% in 2019. Should this happen, a typical buyer looking to spend no more than 30% of its income on property would need to cut $35,000 from their buying budget just to cover these higher mortgage payments.
In turn, this would instantly make around 31,700 of the current ‘for-sale’ properties around the USA completely out of the budget of people who fall in this demographic. As mortgage rates rise, homeowners are far less likely to opt to take out new mortgages to buy property. Instead, they are deciding to stay in their current homes, to benefit from the lower mortgage rates they have already secured.
Increase in inventory
Furthermore, towards the end of 2018 we saw an increase in the amount of new inventory for sale on the US property market. While you’d think more inventory would translate into more sales, the homes that have been completed more recently are more suitable for owners looking to upgrade their current homes, rather than start from scratch, which is where the real demand is. As these new homes sit at the costlier end of the price scale, many prospective buyers can’t afford them – particularly when factoring in the new higher mortgage rate payments people are facing.
However, there is some good news for those of you wanting to buy property in the USA. In a bid to flog some of this inventory, prices of these newly-constructed homes have been slashed in almost every major metro area. Zillow reported that in the final quarter of 2018, more than 25% of new-build homes had their prices cut at least once.
In Denver in Colorado, almost 40.3% of newly-constructed homes were slashed in price. Also, in Tampa in Florida, prices were reduced on 32.3% of properties. Additionally, in San Francisco, one of the USA’s most expensive markets, 37.2% of the new-build added inventory was cut in price. Therefore, if you’re in the market for new-build property in any major metro area in the USA, be sure to research what cuts have been made, and where, and to seek out advice as to whether further cuts look imminent in order to establish the prime time to make a move.
Hottest US property markets in 2019
When figuring out which areas of the US property market in 2019 are set to be the hottest, you need to follow the job opportunities. This year, this could once again be San Jose in California – one of the most thriving cities in Silicon Valley. San Jose boats the most job opportunities per person in the country, the lowest unemployment rate and an ever-climbing household income. The value of property in the popular spot increased by 10% in 2018 to a median home value of $1,251,200. This median value is expected to increase by 12% in 2019.
The second hottest market in the country is Orlando in Florida. While the median property value is considerably more affordable at $233,700, the city has seen the biggest population growth (2.8%) of any US city, bar Atlanta. Also, Orlando has the fifth-most job opportunities per person of all major cities. Great news for those of you considering a move to Florida!
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If you’re still weighing up top choice for where to buy in the USA, do keep in mind the rest of the top 10 hottest markets predicted for 2019, which include Denver (Colorado), Atlanta (Georgia), Minneapolis (Minnesota), San Francisco (California), Dallas (Texas), Nashville (Tennessee), Jacksonville (Florida) and San Diego (California).
Where should I invest in the US property market in 2019?
If you’re considering entering the US property market in 2019 as an investment, there are a few factors you should consider when determining where to buy. Ideally, you want to choose a location that meets the following criteria…
- An area experiencing considerable population growth
- An area with lots of job opportunities that is attracting young professionals who will be looking to rent
- An area where home values are growing, but cost of living remains affordable
- An area experiencing growth in rental rates that is ideally 20% faster than the rest of the country.
Many of 2019’s hottest rental markets are in the South. For example, if you’re looking to buy property in Florida to rent out, either to long-term tenants or holiday-makers – Orlando and Jacksonville present great value. In Orlando, the median rent in the city is currently $1,472 per month. Additionally, in Jacksonville, the median property price currently stands at $208,200, and the median monthly rent is $1,357. St Petersburg, Tampa and Clearwater are other rapidly growing markets in Florida you might want to invest in sharpish.
Also in the south, Texas is another excellent spot for investors, particularly Austin, Dallas, Fort Worth and San Antonio.
In 2018, we saw millions of people up sticks from their homes in the USA’s priciest housing markets and relocating to more affordable areas. Cost of living, house prices and job opportunities are the major factors attracting migrants to secondary cities such as Raleigh in North Carolina and Nashville, Tennessee. Those fleeing the high price tag of US property in California headed to Sun Belt cities like Phoenix and Las Vegas. This is a trend we expect to see more of in 2019.
This exodus from certain states could be further exacerbated by the new tax code President Trump signed into law in 2017, removing certain deductions from state and local taxes. As the effects of this action become clearer this spring, many could choose to relocate to states with a more favourable tax situation.