How’s the Real Estate Market looking?
We have 2020 Vision
By: Lane Stone
2020, the start of a new decade. This is the time we reflect on the past as well as focus on what is yet to come. Some will begin new resolutions, some will break bad habits, and whichever direction we go, we are all in this together. How’s the Real Estate Market looking?
This year also happens to be an election year. A year full of unknowns and circumstances beyond our control. We always get asked the question leading up to an election as to how an event such as this affects the Real Estate market. We don’t have a crystal ball, but we do have historical data. Let’s reflect on how the last Presidential Election affected residential Real Estate.
Here is what we know and have found.
I pulled Residential Real Estate economic data from the Orange County Association of Realtors and looked into every single month in 2016. What I found may or may not surprise you. Every single month in 2016 had Year over Year (YOY) appreciation for both Median and Average sales price on homes. Year over year means comparing one period of time with the prior year. In this case 2016 of a certain month is being compared to 2015 of the same month. How’s the Real Estate Market looking?
This information told us that Sellers were still willing to sell and Buyers were still feeling bullish enough to buy during what was a pretty contentious Presidential Election. It doesn’t look like things are going to be much different in 2020 in terms of emotion and controversy.
Another stat I wanted to look into was what percentage of the listing price were sellers receiving during this time? Sure there are always going to be sellers willing to sell, and buyers willing to buy. But are the buyers during an election year willing to pay full price? The answer for 2016, was yes! We saw about a 96-97% List to Close price variance. This was less than a .5% change from the year prior.
Going beyond looking into the 2016 election year, I wanted to look back even further, and into a more macro level. Did you know, home prices actually appreciated in value during 3 out of the last 5 recessions? Home prices will follow unemployment levels, vacancies, and even interest rates more so than the stock market. In 2001, the stock market went down by 25% and Real Estate was up by more than 6%. Real Estate economists are predicting something similar for our next recession.
I read a very interesting article written by Harvard Business Review. Their research showed that since 1800, Real Estate has followed 18-year cycles every single time except for two: WWII and the 1979 doubling of interest rates. This means that if this 18-year cycle still holds true, the next Real Estate correction won’t be until 2024.
Based on the above, while we cannot predict any significant events, we at the Sackin-Stone Team are remaining very bullish for 2020!
