The housing market in 2019 may be stronger than originally predicted, according to a recent report from realtor.com. The site’s updated 2019 housing forecast indicates a shift in the economic outlook. A higher home price growth of near 3 percent, stronger homes sales and a slower pace of monetary tightening may lead to lower mortgage rates of 4.5 percent by the end of the year.
"The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019," said Danielle Hale, realtor.com's Chief Economist. "We believe 2019 will be characterized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers' purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago."
Long term mortgage rates have been brought down to around 4%, due to Fed’s decision to hold out on future rate hikes. Before the Fed’s decision, realtor.com’s data suggested an increase in upward momentum spurred by continued economic growth and monetary policy tightening.
Home prices are expected to be higher than previously anticipated, as mortgage rates fall and buyers gained more purchasing power. realtor.com anticipates home prices in 2019 to be 2.9 percent higher than in 2018, 0.7 percent higher than the original prediction.
Home sales slipped in 2018, and are still anticipated to slip in 2019, but realtor.com notes that this year’s drop in home sales should remain essentially flat with 2018. Initially, realtor.com expected home sales to slip 2% year over year, but increasing inventory levels and lower mortgage rates should give the market a boost in this area.
Data from the Census Bureau and the Department of Housing and Urban Development shows that increasing inventory from has already spurred new sales. According to the report, March 2019’s seasonally adjusted annual rate of 692,000 new home sales is above February’s 662,000, and is 3.0% above the March 2018 estimate of 672,000.
“Although weaker March existing home sales followed muted February pending home sales, March new home sales data continues to show strength with 692,000 new home sales, up 4.5% from February and above last year’s sales pace (3.0%),” Hale said. “This trend supports the fact that lower mortgage rates have started to entice buyers this spring and foreshadows a potential strengthening of pending and existing home sales in the months to come. Looking forward, orders should also help bolster builder confidence and boost new construction. We've already seen a slight improvement in builder confidence. Continued moderation in the median price due to an increase in the share of sales in the $200,000-$300,000 category is also a good sign. In this housing market, affordability for buyers is key.”