Trends & News 5 Major Trends of the US Real Estate Market in Q3 2018 by Eman Hamed November 17, 2018February 20, 2019 by Eman Hamed November 17, 2018February 20, 2019 Whether you’re a first-time real estate investor or an experienced one, you need to stay up-to-date with the different real estate market trends. The US real estate market is constantly changing and property investors need to understand and prepare for any change. In addition, understanding current trends enables you to predict future ones which could have an impact on the success of your property investment. This blog covers Q3 2018 US housing market trends from real estate experts, analysts, and economists that property investors need to know before making any investment decision. Disclaimer: The information in this blog post is a result of an educated and thorough market research and is only intended for educational purposes. Housing Inventory Real estate housing inventory has been falling for years nationwide. While it remains historically low, it appears that this trend is on the verge of turning. Inventory is finally starting to climb back in a number of cities across the US real estate market. According to Trulia’s Q3 2018 Price and Inventory Report, while housing inventory today is lower than it was a year ago, it fell by only 2.5% year-over-year in Q3 – the smallest annual decline since 2015. The report also states that “the total number of homes available for sale nationwide in Q3 was the highest it’s been so far in 2018.” Inventory has actually improved in some of the priciest markets in the country. As a matter of fact, 5 of the 10 markets with the largest annual housing inventory boost are in California, where property prices are among the highest in the US real estate market. Moreover, Seattle has also experienced an improving year-over-year change in inventory, which rose 45% from a year ago. Californian locations with the largest inventory gains are: San Jose (66.9%) San Diego (37.7%) Ventura County (31.6%) Oakland (25.9%) Orange County (20.7%) This is good news for buyers and property investors frustrated by lack of available homes for sale and the rapidly rising property prices. When there is more supply of properties to meet the demand, this helps take some of the heat out of the real estate market and slows price growth. While it may be difficult for first-time buyers and beginner property investors to find starter homes, the improving inventory gives them a bit more power. Affordability Even as supply comes creeping back, affordability (the percentage of income needed to buy a median-priced home) is not getting any better. Typically, an affordability index above 100 indicates that median home prices are more affordable than the historic average, while an index below 100 indicates that median home prices are less affordable than the historic average. ATTOM Data Solutions recently released its Q3 2018 US Home Affordability Report, which shows that home prices in the US during Q3 were at the least affordable level since 2008. According to the report, the home affordability index in the US real estate market in Q3 2018 was 92 – down from an index of 95 in the previous quarter and 102 in Q3 2017. Related: House Price Trends to Expect in the US Real Estate Market 2019 Furthermore, home prices have risen much faster than incomes over the past year. Housing affordability has affected all housing segments but felt most acutely among starter home buyers. Such real estate market trends mean that even though inventory is on homebuyers’ side, first-time buyers will need to spend more of their income to get a house relative to a year ago. Having trouble finding an affordable property in the US real estate market? Mashvisor’s heatmap tool can help. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here. Annual Appreciation Rate A rational response to the worsening home affordability is a slowdown in the home price appreciation rate in the US housing market. In fact, ATTOM Data Solutions’ Q3 2018 US Home Sales Report shows that the US median home price went up 4.3% in Q3 2018 from a year ago. According to the report, this is the slowest rate of annual home price appreciation since 2016. Moreover, another key factor behind the slowdown of annual home price appreciation is the rising rates on monthly mortgage payments. This slow increase may allow those trying to save up for a down payment and enter the real estate market a bit of time to catch up. However, not all cities in the US real estate market are experiencing this annual appreciation rate cooldown. For example, the annual home price appreciation rate slowed in 74 of 150 metropolitan areas including: Los Angeles (5.8%) Chicago (1.6%) Dallas-Fort Worth (5.8%) Houston (3.5%) Miami (3.9%) On the other hand, the other 76 of 150 metro areas saw double-digit percentage increases in home price appreciation rate! These include: San Jose (11.9%) Las Vegas (14.0) Colorado Springs (12.1%) San Francisco (11.6%) Atlanta (10.3%) As you can expect, these fast-appreciating cities are some of the most expensive in the US. Property investors need to be careful before making an investment decision and buying an investment property there because, while they’re profitable for the long-term, they’re harder to finance. Related: What You Need to Consider Before Buying Investment Property Equity in Real Estate Another report published by ATTOM Data Solutions is its Q3 2018 US Home Equity & Underwater Report which shows that nearly 14.5 million properties in the US housing market with a mortgage (25.7% of all properties) were equity rich. This is up by more than 433,000 from a year ago. If you’re not familiar with equity rich, it’s when owners owe less than 50% of the property’s value on outstanding mortgages. Data shows that states with the highest share of equity rich properties were: California (42.5%) Hawaii (39.4%) Washington (35.3%) New York (34.9%) Oregon (33.6%) This increased equity may be a silver lining for both mortgage lenders and sellers. Moreover, the same report also shows that more than 4.9 million properties with a mortgage (8.8% of all properties) in the US real estate market were seriously underwater. This means that the amount of the outstanding mortgage is at least 25% greater than the current value of the property. More homeowners decide to stay put longer in order to build more equity in their homes despite the slow home price appreciation rate. According to the report, states with the highest share of underwater properties were: Louisiana (21.3%) Mississippi (16.2%) Iowa (15.5%) Arkansas (15.3%) Illinois (15.1%) Foreclosure Activity A decade after poorly unwritten mortgages caused the US housing market crash, it seems that associated foreclosure risk has faded. Instead, the biggest foreclosure risk today comes from natural disasters such as the hurricane trio of Harvey, Irma, and Maria of last year. Those hurricanes impacted many local markets and foreclosure starts increased in Q3 2017 (a total of 191,824 US properties with foreclosure filings). Fast forward a year later, ATTOM Data Solutions published its Q3 2018 US Foreclosure Market Report which shows a total of 177,146 US properties with foreclosure filings. This is down 8% from last year, making it the lowest level since Q4 2005! Counter to this national trend, 15 states still showed a year-over-year increase in foreclosure starts in Q3 2018. These include: Florida (up 25%) Texas (up 3%) Maryland (up 13%) Michigan (up 32%) Missouri (up 10%) Furthermore, lenders started the foreclosure process on 91,849 properties in the US real estate market in Q3 2018 – down 3% from a year ago. According to the report, this is the 13th consecutive quarter with a year-over-year decrease in foreclosure starts. REO properties also went down 8% from the previous year, the lowest level since Q2 2005. All these real estate market trends mean that property investors looking to buy foreclosed homes below market value still have the chance to find such investment properties, but they should make their move soon. Related: The Pros and Cons of Buying a Foreclosure US Real Estate Market Trends- The Bottom Line Property investors should always be on the lookout for different trends of the current housing market to be able to predict where the market is going and, thus, make smart investment decisions accordingly. Based on Q3 2018 US real estate market trends discussed in this blog, a real estate investor has a lot to consider before deciding to sell or buy an investment property. Nonetheless, if you are looking to buy, Mashvisor will help you find profitable and lucrative properties using advanced search tools like the Property Finder and Investment Property Calculator. To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo or click here to start your 14-day free trial with Mashvisor now and try it out for yourself. Start Your Investment Property Search! START FREE TRIAL Affordable MarketsAppreciationEquityForeclosuresMarket Analysis 0 FacebookTwitterGoogle +PinterestLinkedin Eman Hamed Eman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. 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