[Read A Bit Blog] 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.
What does it mean for you? If you’re a current homeowner, real estate proves once again to be a solid investment over the long term. If you’re in the market to buy a home, act fast. Prices will continue to rise, so you’ll pay more the longer you wait.
SALES LEVELS WILL STABILIZE
In 2018, we saw a decline in sales, primarily driven by rising mortgage rates and a lack of affordable inventory. But experts predict sales will rise slightly this year and next.
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 cool-down can prevent a hot housing 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.2 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 20183
While mortgage rates above 5% 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%,
and rates didn’t fall below 5% until 2009.
So for buyers who can make the math work,
buying a home is likely still an investment worth making.5
What does it mean for you? If you’re in the market to buy a home or refinance an existing mortgage, act quickly before mortgage rates rise.
AFFORDABILITY ISSUES WILL PERSIST
The combination of higher home prices and rising mortgage rates will make it increasingly expensive to buy a home. “Buyers who are able to stay in the housing 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.”
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.
MILLENIALS 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.”3
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.”4
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.
Sources: 1. Freddie Mac Economic & Housing Research Forecast / 2. Mortgage Bankers Association Forecast /
3. Forbes 2019 Real Estate Forecast / 4. Realtor.com Housing Forecast 2019 / 5. FOX Business (www.foxbusiness.com)
We are here to help
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local housing 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.
