Because according to some data this year of 2019. Our predictions revealed that the housing market could be one the coolest year.
Either for real estate professionals, home sellers and first-time home buyers.
This cold breeze in the housing market could be as something we’ve seen in the past years. But, homeownership, after all, will continue to rise along the subsequent months.
So far we predict eventually the real estate market will moderately cold during the first and the second trimester of 2019.
Meanwhile likely still positive, will be the lowest we’ve seen since 2014 or possibly even 2011.
However, Investors and house-flippers will back away from the cooling market. While, real estate companies that buy homes from consumers to quickly sell at a profit will face their first serious test.
Tech companies and local governments will continue to go head to head on local housing issues.
Prediction #1: The housing market will continue to cool
Over the first half of 2019, home-price growth will stay slow. Our forecasts have price growth settling around 3 percent, which would be the slowest price growth we’ve seen in years.
As recently as the first half of this year, prices were still growing 7 percent, and price growth has reliably exceeded 5% since the start of 2015.
“A few weeks ago I helped my home-buying customers get a bid accepted that would have gone straight to the bottom of a pile of offers earlier this year,” said San Francisco Redfin agent Anna Coles.
“The offer for a house in desirable Parkside was below list price and included a financing contingency, which allows the buyers to back out of the contract without forfeiting their earnest money deposit on the off-chance their loan doesn’t get approved.
The norm for the past two-plus years had been that buyers had to waive standard protections like this in order for a seller to consider their offer, but this is just one sign that buyers may face less competition heading into 2019.”
On the flip side, we expect home prices to continue to grow at a strong pace in a handful of small, affordable, inland markets like Buffalo, Rochester, and Greensboro, where the market is still heating up.
We’re going into 2019 with a 5 percent greater supply of homes for sale than we had to go into 2018, which is the highest growth we’ve seen since September 2015. But home sales were down 8 percent since last year in November.
A still-growing economy and increased access to credit will support more home buyer demand, but higher interest rates will make home-buying more expensive, so it’s hard to say whether home sales will stay down or rebound next year.
Prediction #2: Homeownership rates will continue to rise
Prediction #3: It will cost more to borrow, but more people will have access to credit for home-buying
Homebuyers have already seen mortgage interest rates increase in 2018, and the Fed’s most recent comments indicate that it will continue to raise rates perhaps twice or more in 2019, which will push the average 30-year fixed mortgage rate up to about 5.5 percent by the end of the new year.
Lenders will also feel the effects of rising rates, which will increase their costs of lending and dampen demand for their services.
This will motivate lenders to expand their customer base to low-income borrowers and first-time homebuyers. But of course, lenders will charge more for these loans–both to cover the risk of lending to borrowers with less-than-perfect credit and to cover their own costs of borrowing.
Prediction #4: A cooling housing market will dampen economic growth only slightly
In 2018, economic growth was the strongest it has been since early 2015. However, residential investment, which includes money spent on construction, renovations, and real estate commissions, and typically makes up about 15 to 18 percent of economic activity, declined slightly in 2018.
An atypical situation which has only happened three times in the last 40 years, total economic activity would be impacted by 1 to 2 percent. That isn’t enough to cause a recession as long as the rest of the economy keeps growing.
From that perspective, there could be some spillovers from the cooldown in the housing market to consumer spending.
Prediction #5: Fewer homes will be built, but more builders will focus on starter homes
In 2019, homebuilders will be more cautious about building during a cooling market and focus on building starter homes that are easier to sell than luxury homes.
We have already seen the per-unit value of single-family residential building permits flatten, and we predict per-unit values of building permits will decline in 2019.
Another factor in 2019 will be low unemployment, which will finally cause wages to rise for low-income workers. This will impact both the supply of and demand for housing.
On the supply side, higher labor costs will limit the number of homes built. Meanwhile, higher wages will be a boon to demand starter-homes among working-class Americans.
“When we decided to plan our first new construction development, we found a niche in the $250,000 price range in Dallas, where there is a great deal of activity among national and local builders.
Just in the past few months, we’ve already begun to see other builders catch on to this unmet need in the market, with other affordable, starter-home options coming available to local buyers soon.”
Prediction #6: Institutional buying faces its first serious test
Nevertheless, if home-buying demand falters due to higher interest rates and stock-market volatility. Meanwhile, the trend toward instant offers from institutional homebuyers could face its first serious test, a test of pricing algorithms as much as companies’ appetite for risk.
Armed with billions in capital, competitors from Open door to RedfinNow to Zillow to Offroad to Knock have been vying with one another to buy homes from consumers and then sell those properties at a profit, with i-buyers’ combined share of U.S. home sales growing rapidly.
The question investors are asking is whether instant offers will now be significantly lower, to compensate institutional buyers for the market’s recent uncertainty and whether homeowners will accept the offers, just to avoid those same uncertainties themselves.
Institutional buyers who made money from nearly every sale in a rising market with low-interest rates could start to face losses, or may demonstrate more discipline than other housing investors. In 2019, we’ll find out.
If i-buying works in a bear market as well as it has in a bull market, instant offers could become a major, permanent sector within the real estate economy. If it doesn’t, a lot of money is going to sink into the sand.
Prediction #7: Tech and local government will go head-to-head on housing
As we know, cities have been struggling with the double-edged sword of tech-company-driven prosperity and inequality.
Tech companies bring highly skilled workers to cities and pay them handsomely.
This is why 238 cities vied for Amazon’s HQ2. But, shortly after the HQ2s were announced, residents of Long Island City began protesting, advocating for more housing investment to avoid displacing existing residents.
Crystal City has planned ahead with 4,000 new housing units, but Amazon plans to hire 25,000 people there. Growing cities will have to start building more housing now if they don’t want to face the affordability.
At the same time, homelessness problems that established tech hubs like Seattle and San Francisco are currently facing.
This article reflects the beliefs of our blogging team about the overall housing market. If you would like to find out which of our predictions in this article come true, and which predictions turn out to be incorrect, visit our real estate page