10: 2018 Wrap Up
The continued strength of the economy will create the perfect storm for first-time homebuyers to finally buy a place of their own.
The CE Shop
About This Episode
Despite rocky politics, 2018 was a great year for the economy and a good time to work in real estate. On this episode, we look back at the major news stories of the year and explore what some of them mean for the industry as we move into 2019.
Articles mentioned in this episode:
- Inman's article about Matthew Gardner's predictions for 2019
- A poll conducted by NBC News / Wall Street Journal
Subscribe to our podcast and listen every monthView All Episodes »
Another year has come and gone, and as we prepare for the new year it can be difficult to remember all the things that happened in 2018. From the near-endless stream of political headlines that made you question reality to the continued strength of the American economy, 2018 has been a rollercoaster of emotions and has hopefully been a great year for your business.
When this episode goes live, there will only be a few precious days left in the year - that’s just a few days to get things right, to avoid getting things wrong, and just a few more chances to finish 2018 strong.
Hello and welcome to Shop Talk: The Real Estate Show. I’m Jon Forisha, and on this episode we look back at the last 12 months to recap a few of the year’s biggest stories and how they affected real estate now and into the new year.
According to Spotify, music in 2018 was ruled over by Drake and Ariana Grande, who had a combined count of almost 9 billion streamed songs. Netflix pumped out a dizzying amount of TV shows and movies throughout the year on a budget of $13 billion, Black Panther was the highest-grossing movie of the year, and the national mystery of where Amazon would open its second headquarters was answered in a fairly disappointing fashion.
In a year riddled with one mass shooting after another, the American economy was a welcome bright spot in the news. In August, Apple became the first publicly traded US company to reach a valuation of $1 trillion. 18 states and 20 cities raised their minimum wages in 2018, and the national unemployment rate currently sits at 3.7%, which is the lowest in more than a decade. More employed people leads to more potential homebuyers, and real estate markets around the country proved it. Inman predicts we’ll end the year with a median home price of about $260,000, which is up 5.4% over last year.
Despite continued economic strength, housing markets did start to slow around the country, due in large part to a lack of inventory. The US Census Bureau reported that January marked a 10-year high for housing starts, which is the point when construction begins on a property, but in most parts of the country, that supply still doesn’t match up with the demand. Without enough new homes and with a short supply of existing homes for sale, housing prices have gotten so high that buyers are either out-bid for their dream home or entirely priced out of competing.
The Federal Reserve is partly to blame for buyers’ hesitation to hop into a bidding war. Just two days before this podcast was posted, stocks dipped to their lowest levels of the year in anticipation of the Fed raising rates again. Inflation is a nasty side effect of having such a strong economy, and the Fed has already increased rates three times in 2018 in an effort to control the rise of inflation. If they do so again, it will likely lead to higher mortgage rates. That would push the prospect of homebuying even further out of reach for those young professionals in hot markets that are looking to settle down.
In November, the US hit a new unfortunate milestone with a record $1.465 trillion of outstanding student loan debt. This is more than double the $675 billion of outstanding debt from June 2009. Millennials are now the largest generation in the US workforce, and many are burdened with student loan debt, which is the obvious answer to the often asked question “Why aren’t Millennials buying more homes?”
Woven into 2018’s strong economy were a disturbing number of natural disasters. There were catastrophic earthquakes in Indonesia and historic flooding in Japan, and closer to home were a series of wildfires as late in the year as November. The Camp Fire became the deadliest wildfire in California history when it destroyed the town of Paradise, forcing all 27,000 residents to evacuate their homes. On the east coast, Hurricane Florence ravaged communities and caused over 600,000 people to lose power in North and South Carolina.
The increasing frequency and intensity of hurricanes has made many homeowners pay closer attention to the fine print of their insurance policies. Here’s a quick refresher: flooding is only covered by flood insurance, and in certain states windstorm damage is only covered under a separate windstorm insurance policy. If you or your clients find themselves owning property in an area frequently visited by hurricanes, both policies would be a good idea.
The biggest section of the news that I’ve left out so far is politics, and the near-constant flurry of headlines so insane that they might make you wonder how anyone accomplishes anything in a government job. In November there were contentious mid-term elections across the country, and one of the biggest stories going into the new year has to do with the ongoing trade war with China, and all the industries it will inevitably affect.
So that was the good, the bad, and the ugly of 2018, and as usual when recapping the news, it paints a pretty bleak picture. Depression is no way to start a new year, though, so let’s talk about how 2019 might be an excellent year for real estate and your business.
Despite the doom and gloom of the media, a poll by NBC News and the Wall Street Journal found that a majority of Americans have a better outlook on the state of the country and their own personal lives in 2018 than they did in past years. A combined 30% of Americans called 2018 either one of the best years for the country or an above average year, which is the highest percentage since the poll began asking that question in 1991.
In an Inman article we linked to in the show notes, Windermere Real Estate’s Chief Economist Matthew Gardner predicts that 2019 will be the year of the first-time homebuyer. Gardner foresees continued home inventory growth and modest pricing increases, as well as slightly higher mortgage rates. The continued strength of the economy will create the perfect storm for first-time homebuyers to finally buy a place of their own. A much-feared housing bubble and its impending burst seems unlikely due to the very high credit quality for new mortgage holders, and the fact that the median down payment is at its highest level since 2004.
Another trend that will continue into 2019 is the growing number of alternate methods to list a house. Zillow, Opendoor, OfferPad, and even Airbnb have all made moves to get into the real estate business. OfferPad even promises an offer for your house within 24 hours of signing up, and many real estate agents are getting a bit nervous about the new competition and their absurdly-deep pockets.
In a real estate study conducted by The CE Shop, Real Trends, and the California Association of REALTORs, we found that in the first half of 2018, 90% of all buyers and sellers reported using a real estate agent for their transaction. No matter how many big corporations decide to try and rake in your real estate business, just remember that this industry is all about the human qualities, and that there’s a lot more to your job than just filling out piles of paperwork.
Wherever you are when the New Year strikes, here’s to hoping it’s the beginning of a wonderful year full of personal and professional wins, and that all of your real estate dreams come true.
That’s it for this episode of Shop Talk, thanks for listening! You can subscribe to us on any podcast player of your choice, and while you’re there consider leaving us a review! We’ll be back in the new year with an interview with Adrienne Meisels, founder of an app called myplanit that promises to change your real estate workflow forever.
Shop Talk is a production of The CE Shop.