What’s Ahead for Real Estate in 2019?
As we begin another year, everyone wants to
know: “Where is the housing market headed in 2019?”
It’s not only buyers, sellers, and homeowners
who are impacted. The real estate market plays an integral role in the overall
U.S. economy. Fortunately, key
indicators point toward a stable housing market in 2019 with signs of modest
growth. However, shifting conditions could impact you if you plan to buy, sell,
or refinance this year.
HOME
VALUES WILL INCREASE
The value of real estate will continue to
rise. Freddie Mac predicts housing prices will increase by 4.3 percent in 2019.1 While the rapid price appreciation we
witnessed earlier in the decade has slowed, the combination of a strong
economy, low unemployment, and a lack of inventory in many market segments
continues to push prices higher.
"Ninety percent of markets are
experiencing price gains while very few are experiencing consistent price
declines," according to National Association of Realtors (NAR) Chief
Economist Lawrence Yun.2
Yun predicts that the national median
existing-home price will increase to around $266,800 in 2019 and $274,000 in
2020. "Home price appreciation will slow down—the days of easy price gains
are coming to an end—but prices will continue to rise."
What
does it mean for you? If you’re in the market to buy a
home, act fast. Prices will continue to go up, so you’ll pay more the longer
you wait. If you’re a current homeowner, real estate has proven once again to
be a solid investment over the long term. In fact, the equity level of American
homeowners reached an all-time high in 2018, topping $6 trillion.3
SALES
LEVELS WILL STABILIZE
In 2018, we saw a decline in sales, primarily
driven by rising mortgage rates and a lack of affordable inventory. However,
Yun isn’t alarmed. "2017 was the best year for home sales in ten years,
and 2018 is only down 1.5 percent year to date. Statistically, it is a mild
twinge in the data and a very mild adjustment compared to the long-term growth
we've been experiencing over the past few years."2
Yun and other economists expect home sales to
remain relatively flat over the next couple of years. Freddie Mac forecasts
homes sales will increase 1 percent to 6.08 million in 2019 and 2 percent to
6.20 million in 2020.1
“The medium and long-term prospects for
housing are good because demographics are going to continue to support demand,”
explains Tendayi Kapfidze, chief economist for LendingTree. “With a slower
price appreciation, incomes have an opportunity to catch up. With slower sales,
inventory has an opportunity to normalize. A slowdown in 2019 creates a
healthier housing market going forward.”4
What
does it mean for you? If you’ve been scared off by
reports of a market slowdown, it’s important to keep things in perspective. A
cooldown can prevent a hot market from becoming overheated. A gradual and
sustainable pace of growth is preferable for long-term economic stability.
MORTGAGE
RATES WILL RISE
The Mortgage Bankers Association predicts the
Federal Reserve will raise interest rates three times this year, resulting in a
rise in mortgage rates.5 While no one can predict future mortgage
rates with certainty, Realtor.com Chief Economist Danielle Hale estimates that
the rate for a 30-year mortgage will reach 5.5 percent by the end of 2019, up
from around 4.62 percent at the end of 2018.6
While mortgage rates above 5 percent may seem
high to today’s buyers, it’s not out of line with historical standards.
According to Hale, “The average mortgage rate in the 1990s was 8.1 percent, and
rates didn’t fall below 5 percent until 2009. So for buyers who can make the
math work, buying a home is likely still an investment worth making.”7
What
does it mean for you? If you’re in the market to buy a
house or refinance an existing mortgage, you may want to act quickly before
mortgage rates rise. To qualify for the lowest rate available, take steps to
improve your credit score, pay down existing debt, and save up for a larger
down payment.
AFFORDABILITY
ISSUES WILL PERSIST
Although the desire to own a home remains
strong, the combination of higher home prices and rising mortgage rates will
make it increasingly difficult for many first-time buyers to afford one.
“Buyers who are able to stay in the market
will find less competition as more buyers are priced out but feel an increased
sense of urgency to close before it gets even more expensive,” according to
Hale. “Although the number of homes for sale is increasing, which is an
improvement for buyers, the majority of new inventory is focused in the
mid-to-higher-end price tier, not entry-level.”6
What
does it mean for you? Unfortunately, market factors
make it difficult for many first-time buyers to afford a home. However, as
move-up buyers take advantage of new high-end inventory, we could see an
increase in starter homes hitting the market.
MILLENNIALS
WILL MAKE UP LARGEST SEGMENT OF BUYERS
“The housing market in 2019 will be characterized
by continued rising mortgage rates and surging millennial demand,” according to
Odeta Kushi, senior economist for First American. "Rising rates, by making
housing less affordable, will likely deter certain potential homebuyers from
the market. On the other hand, the largest cohort of millennials will be
turning 29 next year, entering peak household formation and home-buying age,
and contributing to the increase in first-time buyer demand.”4
Danielle Hale, chief economist for
Realtor.com, predicts the trend will continue. “Millennials are also likely to
make up the largest share of home buyers for the next decade as their housing
needs adjust over time.”6
What
does it mean for you? If you’re in the market for a
starter home, prepare to compete for the best listings. And if you plan to sell
a home in 2019, be sure to work with an agent who knows how to reach millennial
buyers by utilizing the latest online marketing techniques.
WE’RE
HERE TO GUIDE YOU
While national real estate numbers and
predictions can provide a “big picture” outlook for the year, real estate is
local. And as local market experts, we can guide you through the ins and outs
of our market and the local issues that are likely to drive home values in your
particular neighborhood.
If you’re considering buying or selling a home
in 2019, contact us now to schedule a free consultation. We’ll work with you to
develop an action plan to meet your real estate goals this year.
START PREPARING TODAY
If you plan to BUY this year:
If
you plan to SELL this year:
|
Comments
Post a Comment