2014 was another great year in real estate, not only in the US but here in Newport Rhode Island too. A booming economy, stock market appreciation and a surprise in the mortgage industry with interest rates returning to low levels instead of rising, were just a few highlights of 2014. Here’s a quick recap of 2014’s Real Estate Market;
US Real Estate Market Conditions
The Case/Shiller Housing Index increased 4.5% Year over Year from October 2013 through October 2014. That’s a drastic slow down compared to the 13.6% increase a year earlier. As anticipated (see last year’s recap) the price appreciation slowed down. The slowdown in price appreciation had more to do with the market equalizing, than with rising rates as previously predicted. 2014 was the year both buyers and sellers realized we were out of the depths of the housing crisis, but that we still have a ways to go.
Existing home sales have continued to stay healthy, but are slowing down. In November, NAR reported existing homes sales volume was up only 2.2% over the past 12 months. That’s a far cry from the 7.9% change from 2012 to 2013. The news may say this is still a low number, but we’re finally in the range of sales volume we need for a healthy market to continue.
Newport Real Estate 2014;
Single Family Homes:
Newport single family home sales were steady through 2014. The median sales price increased more than 6.9%! Inventory stayed relatively flat throughout the year, with volume up only 2.13%. The Sales Price to List Price discount widened over the course of the year, but finally started to contract in the 4th quarter. This was due to accelerating list prices with sellers testing the market, then accepting a lower, more marketable price from buyers. Days on Market continues to climb as sellers continue to feel more confident in the market and hold out longer for a better sales price. But inventory priced well is selling very quickly, many in less than two weeks.
Condominiums: Condos still lagged behind the single family market in Newport. Though the absorption rate increased to 14 months from 11 months and sales volume declined by more than 11%, Median sales prices were still up over 10% year over year! This is most likely due to the increase in condominium projects across town over the past 2 years, while demand for condos in town continues to grow. As consumer confidence in real estate continues to improve, the condo market will benefit directly. 2015 will be a much better year for condominiums in Newport.
Multi Families: The Multi Family market in Newport is in flux. Sales prices over the past year sky rocketed another 27.5%! This is on top of the 23.4% increase the year before. That said, the absorption rate is up to 11 months from the 7 months of inventory we had in November 2013 suggesting some weakness there. This may be the result of higher inventory and owners listing at high prices, hoping to fetch a premium.
I see price appreciation slowing down in 2015, which we can see as a good thing, steady growth trumps booms and busts. “Good inventory” will continue to see strong demand with investors seeking assets with higher yields than US treasuries. Reasonably priced inventoyr will sell incredibly fast – often in less than a week. So if you’re a buyer in this market, be ready to jump at a moment’s notice.
Though most economists predict higher interest rates in 2015, the housing market should remain steady with some moderation in single family price increases. Volume will stay even. High end real estate may see a slight slowdown due to the sky rocketing dollar making homes in the US less affordable to foreign buyers. If the rising dollar causes the FED to delay an interest rate increase due to deflation fears, we can anticipate another great year for US real estate with mortgage rates under 4.25%.
All in all, 2015 promises good things for Real Estate assuming no major economic or geo-political events. 2015 will be the year both buyers and sellers view the market as a “good market” with increasing consumer confidence, rising incomes and lower unemployment. Let’s see if my predictions prove true for another year.