According to Realtor.com’s 2019 housing forecast [1], it will be a tough year for those looking to buy and sell homes on account of rising rates and home prices.
Wants vs. Needs
Despite slight inventory gain, mortgage rates are expected to be 5.5 percent by the end of the year, the report said. Monthly mortgage payments are projected to rise by 8 percent. This will keep homeownership out of reach, especially for younger Gen-Z, millennial and other first-time homebuyers. Buyers are likely to find more opportunities in high-growth markets with upscale homes.
The forecast noted that the biggest concern for homebuyers in 2019 will be reconciling wants, needs, and budget versus the heavy competition of 2018. Buyers who stay longer in the market will face less competition and a sense of urgency to close deals is likely to prevail. Majority of new inventory will be focused in the mid-to-higher-end price tier. First-time homebuyers will find it difficult to buy as mortgage rates and prices will keep a lot of new inventory out of their budget, the report said.
Homeowners vs. Competition
Though it will be a strong seller’s market, increasing competition will prevent sellers from getting a full price. Homes priced above median values will take longer to sell and require price cuts or other offerings. Fewer bidding wars and multiple offers will be a key feature of the 2019 seller’s market. Though competitive pricing will help attain profits, it will be different compared to the price jumps in previous years, the forecast indicated.
As far as tax plans are concerned, some homeowners will benefit from lower rates and a higher standard deduction, but many others will find limited itemized deductions and personal exemptions leading to a higher tax bill. The report finds that sales in 2018 started to decline immediately following the tax plan.
Home Sales vs. Inventory
National inventory increases will remain low in 2019 at less than 7 percent in most markets. The number of newly constructed homes have increased slightly and the pace of sale has flattened, the report revealed. A widespread sales gain is not forecasted to happen in 2019, according to Realtor.
Home sales are set for a mild year-over-year decline in 2018, which is likely to extend into 2019 with a 2 percent decline. Gen-Z and millennials will continue to feel locked out of not only of their home but also of the wealth by equity generation that comes with home ownership, the report found. The forecast predicts millennials will account for 45 percent of mortgages compared to 17 percent of Boomers, and 37 percent of Gen Xers.