Housing Market Forecast for 2019
The housing market was defined by low inventory, rising home prices and increasing interest rates in 2018, keeping some prospective home
In November 2018, the average existing-home price was $257,700, which marked 81 straight months of year-over-year gains in home prices, according to the National Association of Realtors. While housing inventory saw a small uptick that month, homes still didn’t last long on the market. The NAR reported the average property typically stayed on the market for 42 days, and 43 percent of homes were on the market for less than a month.
Will these current conditions continue to constrict the market, or will more opportunities emerge for interested buyers? Here’s what the housing market could look like in 2019:
Interest rates could continue to rise
The Federal Reserve closed 2018 by raising the benchmark federal funds rate by 25 basis points, up from 2.25 percent to 2.5 percent. The benchmark federal funds rate is the interest rate at which banks lend money to each other.
Mortgage rates have gradually increased after starting below four percent when 2018 began. The current average for a 30-year fixed-rate mortgage is 4.45 percent, according to Freddie Mac.
While two more rate hikes were previously expected for 2019, that might not necessarily be the case anymore. In fact, market projections currently aren't factoring in one rate hike for the new year.
Supply might remain tight in 2019 and demand could drop
Housing inventory could increase slightly in 2019, but supply will likely remain limited in most markets. Increased interest rates also could deter prospective homebuyers, leading to a drop off in demand.
A potential decrease in demand combined with a slight uptick in inventory could result in fewer bidding wars and could prompt motivated sellers to slightly drop their asking price.
However, it’s important to note that a significant amount of inventory growth has occurred in higher-priced markets, which means there might not be an influx of starter homes available for first-time buyers.
Home price appreciation could taper off
If inventory levels continue to increase at a sustainable rate, then price growth could ultimately slow down. One projection from Ruben Gonzalez, chief economist at Keller Williams, suggests appreciation could drop to 3 percent next year.
This is good news for buyers who have been battling rising home prices and interest rates. While 2019 might not be a true “buyer’s market,” the conditions could certainly give buyers a bit more leverage than in years past.