Some of 2018’s housing market trends such as inventory shortage, rising interest rates, and home price appreciation are likely to continue into 2019 even as the economy continues to perform well. These and other insights into the future of the housing market were given during a webinar by Carrington Mortgage on Tuesday.
Presented by Rick Sharga, EVP, Carrington, the webinar touched upon the current macroeconomic trends before diving into the current housing market and its forecast for 2019.
Speaking about the U.S. economy Sharga said that in 2018 the GDP had performed beyond expectations with the GDP numbers almost at 4 percent last quarter. This, according to Sharga, was a sign that the economy was being productive. Looking at 2019, he said that economists were predicting a more moderate pace of GDP next year. “Economists are predicting a mild recession in late 2019 with the GDP pace slowing further in 2020,” Sharga said.
With unemployment remaining at a 49-year low, job creation has continued to grow well as the economy witnessed a return to well-paying jobs. Sharga also pointed to strong and steady wage growth—another sign of the economy moving in the right direction. While inflation remained relatively low, the rise in wages was likely to trigger a rise in inflation, even though it remained within the Fed’s estimated 2 percent range.
Narrowing the focus to the housing market and some of the trends that impacted the market in 2018, Sharga said that extraordinarily low inventory remained a big problem through most of the year. While inventory levels did go up in certain areas in the latter part of the year, “they're barely reaching four months supply,” said Sharga, referring to the housing supply needed to meet the growing demand of housing.
Referring to the uneven distribution of supply in the market, Sharga said that while we’re seeing a supply glut at the higher end of the market, the middle-range of homes were witnessing an inventory shortage. “The low-end of the market has no inventory at all,” he said.
Looking at the trends for 2019, Sharga said that while inventory would improve slightly it would still not meet demand. Home price appreciation, which has risen by 5.5 percent in the current year was likely to continue, but at a slower pace. Mortgage rates for 30-year loans which approached 5 percent in 2018, were likely to hit the 5 percent mark by mid-2019 and rise further to 5.25 percent by year-end.
Even though they seemed high at present, Sharga pointed out that historically speaking, mortgage rates remained at the low end.
Touching upon home sales, which have disappointed in 2018, Sharga projected sales to rise slightly in 2019, with existing home sales recording between 5.4 million to 5.5 million units and new home sales being pegged at approximately 650,000 units. Manufactured housing was also likely to fill some of the entry-level demand for homes.
With delinquencies projected to reach record lows, there was no foreclosure crisis or a housing bubble on the horizon. “Wage growth and relatively low interest rates have offset price increases so far,” Sharga said. “Price correction is possible in some overheated markets and affordability is better than it looks at first glance, though it is weakening.”
Click here to view the webinar.