Blog posted On January 01, 2019
As we ring in the new year, the predictions are in for 2019. After several years of a red-hot housing market, activity is expected to slow, and that’s good news for home buyers. Expect home price gains to slow and less competition. Here’s what the top economists and forecasters from across the industry expect to see next year.
Lower Home Prices
The housing market has faced an inventory crunch for the past few years, with many buyers competing over limited homes for sale. In 2018, supply of homes for sale began to finally improve. Although inventory is expected to increase in 2019, it will remain relatively low and likely not exceed 7%. Realtor.com chief economist, Danielle Hale, explained, ““In the majority of markets, the number of homes being put on the market or newly constructed has increased slightly, while the pace of sales has slowed slightly, which has helped stop the inventory decline.”
Housing professionals expect bidding wars will begin to fade heading into 2019. With more homes for sale, buyers can expect to have more opportunity to satisfy wants and needs. First-time home buyers, however, might not see as much of a reprieve. Hale warned, “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.”
According to Realtor.com, millennials will comprise 45% of mortgage originations in 2019, followed by GenXers at 37%, and Baby Boomers at 17%. With mortgage rates expected to rise, older homeowners may be less motivated to move, while the largest segment of the Millennial generation approaches 29 and 30, the “peak household formation” age. First American’s senior economist, Odeta Kushi predicts, “surging millennial demand.”
Rents will Rise
Renters will continue to feel the financial strain of rising rents in 2019 and this will impact home buying activity also. Zillow’s director of economic research, Aaron Terrazas, commented on the correlation, “some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rent will reverse and turn positive again.” Renters who are struggling to transition from renting to homeownership should consider the abundance of down payment assistance programs available to them. With over 2,500 down payment assistance programs nationwide, most renters will qualify for help and could be able to buy a home sooner.
Rising Mortgage Rates
After two years of regular federal interest rate hikes, mortgage rates are likely to continue rising. Even with rising rates, mortgage rates are historically low. Terrazas reminded, “Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing.”
Even with housing activity expected to slow overall, some markets will stay busier than the national average. If you are planning to buy a home in 2019, get preapproved for mortgage financing ahead of time. Mortgage preapproval ensures a faster transaction, no matter what else is going on in the local market.