What’s Ahead for the Housing Market 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 in some parts of the country. But for California, that might not be the case. The California Association of REALTORS® (C.A.R.) is predicting a slight growth in home prices, but a slower weaker market overall. These shifting conditions could impact you if you plan to buy, sell, or refinance this year.

HOME VALUES WILL INCREASE SLIGHTLY

Although Freddie Mac predicts housing prices will increase nationally by 4.3 percent in 2019, C.A.R.’s chief economist, Leslie Appleton-Young thinks the median home price in California will only increase by 3.1 percent.

According to National Association of Realtors (NAR) Chief Economist Lawrence Yun, “Home price appreciation will slow down—the days of easy price gains are coming to an end—but prices will continue to rise.” The one region where he does not see this happening is in the West. He blames this on our “lack of affordable housing inventory.”

What does it mean for you? If you’re in the market to buy a home, prices may soften slightly in Southern California. We’ve already seen that in some markets. But interest rates are also expected to rise. These higher rates can negatively offset any savings you will get from lower prices. 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. But home sellers in California need to focus on what homes are selling for today and let go of prices from last spring and early summer when the market peaked.

SALES LEVELS WILL STABILIZE

Yun and other economists expect home sales nationally to remain relatively flat over the next couple of years. Freddie Mac forecasts national home sales will increase 1 percent to 6.08 million in 2019 and 2 percent to 6.20 million in 2020.

Home sales in California decreased in 2018, and C.A.R. predicts that they will continue to do so in 2019. They estimate there will be 410,450 sales of existing homes in the state in 2018 and 396,800 in 2019.

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. 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.

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.”

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.”

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.”

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.”

What does it mean for you? If you’re in the market for a starter home, there still may be competition 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.

I’M HERE TO GUIDE YOU

While state and national real estate numbers and predictions can provide a big picture outlook for the year, real estate is local. And as a local market expert, I 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 ME now to schedule a free consultation. I’ll work with you to develop an action plan to meet your real estate goals this year.