It’s that time of year when the crystal ball comes out and everyone starts looking ahead at what 2019 real estate may bring. While I am a firm believer in focusing on the present and making wise decisions for you and yours given the conditions we are in, I also know that expectations for the market are a large piece of the overall planning puzzle.
In that spirit, I wanted to share what 3 top sources are reporting with regards to what they think will happen with regards to the market in 2019. (I caution you to take this data as overall, probable considerations– knowing that the market can change at any time based on a variety of factors.) But given what we know today… here is what Forbes, US News and The California Association of Realtors® think you can expect:
| Forbes says to plan on rates hitting numbers not seen since 2008, potentially climbing to 5.8% and higher
| First-time home buyer (FTHB) demand will rise (even amidst rising rates) as the largest cohort of millennials approaches 30, known as the peak in household formation and home-buying age
| Home buying power will decrease – and so will pricing momentum with fewer buyers at each price point
| Inventory will loosen a bit but remain tight in the nation’s most desirable areas; expect inventory not to worsen, but not to improve ‘notably’
Overall, Forbes anticipates a slow-down that will create a healthier housing market, including normalized inventory levels amid less competition. Long-term demand and slower price appreciation will give incomes a chance to catch-up with affordability.
| CAR® projects that interest rates will rise to at least 5.2%, hampering affordability and possibly holding back demand
| California median home prices are expected to increase 3.1% in 2019
| The local trend to watch is ‘outmigration’ as many Bay Area homeowners opted to leave their county or even the state – a trend that appeared to peak in late 2017 and early 2018 with the crazed seller’s market
| Buyers will continue to benefit from an improvement of supply
Overall, CAR® is forecasting a home sales decline of 3%, a 3% improvement within the affordability index and an over 3% increase in home values.
| US News believes that rising rates have not pushed the vast majority of buyers out of the market yet, but that most could see an increase in their mortgage payment of app. $100/month; this may cause buyers to pause and also hold out for what they really want (no more settling for anything they can get!)
| Current homeowners will continue to build equity, just not as fast as we have seen before
| Housing starts reached a 10-year high in 2018, however, are still not yet on track to meet demand – especially in the entry-level sector
| Interest rate rises will restrict further new construction which is actually a positive – as oversupply was a huge issue in the 2008 recession (but isn’t likely to be an issue in a future downturn IF it happens)
| Rising home ownership rates as reported in Q3 of 2018 by the US Census Bureau are good news for renters – who are facing fewer renters to compete with and may have some bargaining power at last…!
Overall, US News expects that the higher cost of financing will create some signs of ‘early weakness’ in the market, but that overall home ownership rates will rise gradually as inventory and prices normalize. Historic low unemployment rates and marginally higher interest rates are signs of a healthy economy, which may slow but not stop buyers and investors.
Let me known if you have any questions about what this means for your home, your local market and your options!
All my best,
Bobbi Decker & Associates fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. For more information, please visit: http://portal.hud.gov/