Economic Snapshot Overview by Dr. Reid Cummings - January 2020
Posted on January 29, 2020 by Dr. Reid Cummings
Greetings, and welcome to the January 2020 Mobile Bay Economic Snapshot.
This month, we recap the year in real estate, contrasting 2019 market activity with the previous year. We also delve briefly into a number of predictions about the real estate industry and investment markets for the year ahead.
There were 5,553 existing single-family homes sold in 2019, generating total sales volume of $1.64 billion. Although the number of 2019 sold units declined 5% from 2018, the total value of all units sold finished the year 14.8% higher. The median sales price was $220,000, a 13.1% increase over 2018. The average sales price of existing single-family homes was higher at $290,200, which is 18.9% more than in 2018.
On the new homes front, a total of 1,402 new homes were sold, a decrease of -3.5% year-over-year, generating total sales volume of $381.8 million. The median sales price was $239,200, up 2.1% from 2018. The average sales price was $272,900, a 3.6% increase over 2018.
A review of 2019 condominium sales indicates 2,464 sales, a slight 0.8% increase over 2018. Total sales volume jumped 5.6% to end the year at $880.2 million. The median sales price was $305,000, 1% for the year. The average sales price rose 3.9% to finish at $354,900.
There were 368 commercial property sales in 2019, a 7.9% increase. The $334.8 million in sales volume surpassed 2018’s total by 21.7%. The 2019 median transaction price fell -34.1% to finish at $244,800. The average sales price rose sharply, finishing 15.6% higher at $898,600.
Vacant land sales generated 2019 total sales volume of $415.4 million, comprised of 2,421 transactions. The median sales price was $68,000. The average sales price was $173,100.
In 2019, 6,677 existing single-family homes were sold, a decline of -19% compared to 2018. Total sales volume also declined year-over-year, finishing 2019 at $897 million. The median sales price rose slightly, up 1.8%, to close at $116,200. The average sales price of $134,900 reflects a 7.7% increase for the year.
Fewer new homes sold in 2019 than in 2018. The 310 sales generated total sales volume of $74.9 million, a decrease of -2.2% over 2018. The median sales price of $224,600 was off as well, but only by -0.9%. The average sales price rose 6.8% for the year to finish at $242,100.
Continuing the 2018 trend, 2019 saw fewer condominiums change hands, registering 177 sales. As expected, total sales volume also fell to close the year at $27.7 million, a decrease of -18.8%. The median sales price was $210,800, a 74.2% year-over-year increase. The average sale price closed the year at $161,400, an 8.3% increase.
There were 420 commercial real estate transactions in 2019, a decrease of -11%. Total sales volume also declined to $341.9 million. The median sales value fell -31% to $334,800. The average sales value also dropped, finishing the year at $803,600.
Finally, the market for vacant land was less robust in 2019, finishing the year with 1,479 sales transactions. Total volume registered $126.5 million, a decrease of -25.1%. Median value rose 48.9% to finish at $42,000. Average sales value was up slightly, ending the year at $84,400.
Expectations for 2020
As each new year unfolds, it is always interesting to consider what ‘experts’ believe will happen in the year ahead. We scanned the web, hoping to make sense of it all. Below are some highlights of what we found.
- 77% of respondents surveyed believe a commercial real estate downturn is not likely until 2021.
- 37% predict a commercial real estate decline will not begin until 2022.
- 64% indicated they would not rent office space to WeWork, while 71% said they would rent office space to other coworking companies.
- Respondents think that within the next 12 months, the retail space sector will enter a downturn.
- Real estate will remain a favored asset class in the face of continued economic uncertainty.
- Innovation and even specialization will be the key for many as adaptive reuse will take on added significance in the face of continued rising construction costs.
- Housing affordability, while not yet at a crisis stage, may well be approaching the tipping point, forcing employers considering relocation to look hard and long at the very real prospect that their employees may not be able to find suitable housing.
- Environmental, social, and governance trends will continue to garner attention. Corporations and stakeholders alike increasingly emphasize sustainability in real estate development and redevelopment. Much of this is driven by the keen interests of members of the Millennial, Gen X, Gen Y, and Gen Z generations in business practices underscored by environmental and social concerns.
- New single-family footprints will shrink, continuing a downsizing trend which began in 2016.
- Home values and rent growth will continue to grow, but much slower.
- Mortgage rates will remain low, continuing to fuel demand.
- The numbers of homes sold will rise, but only slightly.
Who will be right and who will be wrong? For now, it’s anyone’s guess.
Until next time, from everyone at the Center, we wish you and yours all the best.