Sep 16, 2022 Real Estate

Economic Insights + A Look at the Omaha Area Real Estate Market

In early August, we gained incredible insight from the chief economist with Leading Real Estate Companies of the World®, Dr. Marci Rossell. Dr. Rossell shared some fascinating insight regarding the economic future of the country and how it pertains to the real estate market on both the national and local level. We were pleasantly surprised by some of the findings, especially when news headlines can lead you to believe a very different story about the future of our economy. These national trends will help shape the Omaha area market in the months and years ahead.

Let’s zero in on Dr. Rossell’s top five economic insights, including information about how they relate to the Omaha real estate market, both present and future. The data is not as bleak as you may have predicted!

 

Economic Normalization

Omaha Real Estate Market + Economic Insight 2022

The last couple of years have been anything but normal, on just about every level. But thankfully, we are expected to enter a period of normalization for our economy. While the last 18 months have involved soaring inflation and a historic global disruption of supply chains, we are beginning to transition into a period of economic normalcy. Inflation peaked in June 2022 and has now begun to decline. The Consumer Price Index in the U.S. is down to 8.3% from the 9.1% the year before, and the Producer Price Index declined 0.5% month over month this July. Both drops indicate that consumer goods pricing is on its way down and pressure in supply chain pipelines is beginning to abate as well. This produces an increase in consumer confidence and job openings across the nation.

This also translates to a healthy and balanced real estate market here in Omaha, as buyers are less weighed down by daily costs, like groceries and gas. This August, the median home price for a new home in the Omaha area was $443,534, which increased by 13.9% from $389,432 in August 2021. Similarly, existing homes went from a median price of $245,000 in 2021 to $270,000, an increase of 10.2%. While the Omaha area experienced the same rising home prices felt on a national level, the city is still relatively more affordable than the national average of $440,300. And for buyers, we expect to see a continued increase in home value over the next several years, just maybe not as dramatic as the one we just experienced. In the years ahead, we expect steadiness and stability for our local economy.

 

Mortgage Rates

Omaha Real Estate Market + Economic Insight 2022

Mortgage rates have gotten a lot of attention throughout the course of the pandemic, as the Fed dropped and hiked rates in order to stabilize the market. The rate dropped as low as 2.65% for a 30-year fixed-rate mortgage in January 2021. And in 2022, we saw several hikes, with rates reaching as high as 5.81% in June 2022. Dr. Rossell anticipates that rates will continue to settle, stabilizing at around 4.5% to 5% in the coming year, which is well below the 50-year historical average of 7.7% — or the outrageous rate of 18.63% in October 1981!

The increasing rates during the first half of 2022 caused a slight slowdown in the market, as competition cooled off after the buying frenzy of the previous two years. With more inventory to choose from and less pressure from the market, today’s buyers have more breathing room to look at houses at a more leisurely pace. And of course, they can take advantage of historically low interest rates.

 

Consumer Migration

Omaha Real Estate Market + Economic Insight 2022

Employment behavior is almost always connected to the status of the real estate market. And we’ve seen another dramatic shift in employment in the last several years, most notably with the “work-from-anywhere” trend. Remote access has allowed employees to choose where they want to live regardless of where their company is headquartered. This has caused a metro-to-metro migration across the country, as consumers are now considering the geographical cost of living, choice in quality schools, and access to preferred recreational activities. This widens the search radius for prospective home buyers, who can now consider areas of the country they have never been able to move to based on their employment.

Many are choosing to move to Omaha due to the city’s relatively lower cost of living, access to quality schools, low unemployment rate, overall safety, and continued promising growth. New 2020 census numbers showed an official population of 486,051 for the city — a decade-long increase of 77,093, or 19% growth. This is a higher figure than officials had originally estimated! Omaha is an ideal city for families and young professionals in particular. In fact, Omaha was ranked #4 in SmartAsset’s list of the Best Cities for Young Professionals in 2022!

 

Home Inventory

Omaha Real Estate Market + Economic Insight 2022

Housing inventory went through a massive rebound over the last couple of months. In fact, national real estate portal realtor.com reported the biggest one-month jump in active listings since the website launched in 1996. As a result, prospective buyers who had been previously frustrated by a lack of inventory are now entering the market, incentivized by more homes to choose from, normalized interest rates, and a slight decrease in listing prices.

There was a recent 32.8% increase in listings on the market in the Omaha area, going from 1,201 in August 2021 to 1,595 in August 2022. Similarly, listings under contract decreased by 15.5% from 1,376 in 2021 to 1,163 in 2022. Omaha area buyers who had been sidelined now feel motivated to get involved with the market, as they have more options — and less cut-throat buyers to compete with.

 

Fuel Prices

Omaha Real Estate Market + Economic Insight 2022

Fuel prices have appeared in just as many news headlines as mortgage rates over the last several months. But now, we anticipate they may be making headlines for a different reason. We expect “pain at the pump” to continue to decline, as Russian fuel flows back into the markets. At the beginning of August, the national average of regular unleaded gas went from just over $5/gallon to around $4.18/gallon — and dipped even further to $3.69 as of September 15. Dr. Rossell anticipates that in the coming months, as the market continues to normalize, we will see gas prices return to the $3-3.50/gallon range as the national average.

Everything in the economic landscape is connected, so this shift will have a ripple effect on the real estate market. Consumer confidence at the gas pump, in the grocery store, and at the mall will only impact the market in a positive way.

 

The Future is Bright!

Have questions about the Omaha real estate market? We would love to hear from you. Contact us to be connected with one of our agents, who can help you understand the local market and walk through the buying or selling process with ease.

Sep 16, 2022 Real Estate
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