A year ago, several specialists predicted the new tax law could cause a slowdown in the home market. So far, the limitations on mortgage-interest and property-tax deductions haven’t had a negative impact yet.
Economic uncertainty caused by global trade worries , stock market volatility and the the government shutdown also isn’t helping. Within this environment, potential home buyers can be reluctant to make a large purchase such as a house. The last sustained government shutdown in 2013 saw a slump in home sales.
But with all of this said, it is too soon to tell whether the current decline is a temporary lull or a major pullback.
Within their forecasts for 2019, real estate experts anticipate the housing market decreasing down, although not stalling, together with prices and mortgage rates moderating.
“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability must breathe some life into the housing market,” said Doug G. Duncan, chief economist at Fannie Mae.
Below is a snapshot of what home experts are forecasting for 2019.
The National Association of Realtors
The National Association of Realtors expects home sales to flatten and home prices to continue to increase, though at a slower pace. “The forecast for home sales will be very boring — meaning stable,” said Lawrence Yun, NAR chief economist.
NAR expects sales to increase 1 percent to about 5.4 million and the median home price to rise 3.1 percent to around $266,800 in 2019 and $274,000 in 2020. “The days of easy price gains are coming to an end, but prices will probably continue to rise.” Inventory is still a concern.
“All indications are that we have a housing shortage,” Yun said. “If you take a look at population growth and job development, it is clear that we are not generating enough houses”
Because of diminishing affordability from mortgage rate and price increases, Realtor.com forecasts a 2 percent decline in home sales. But buyers looking for high-end homes in pricey subway areas should have more choices.
Realtor.com anticipates price growth to slow down, rising just 2.2 percent in 2019. “Inventory will continue to increase this past year, but unless there is a major shift in the financial trajectory, we do not expect a buyer’s market on the horizon over the next five years,” said Danielle Hale, chief economist for Realtor.com.
Realtor.com has mortgage rates averaging 5.3 percent from the upcoming year and reaching 5.5 percent by the end of 2019, making the average home purchase 8 percent more expensive per month than 2018.
Redfin sees the home market cooling at the first half of the year. Price growth will settle around 3 percent after reliably exceeding 5 percent as the start of 2015.
“There’s quite a bit of uncertainty around our price forecast,” said Daryl Fairweather, Redfin chief economist. “There’s a real chance prices could fall under 2018 levels, putting up negative growth for the first time since 2011.”
Metro areas such as Seattle, San Francisco, Los Angeles, Denver and Portland, Ore., which saw the maximum price growth in the first half of 2018, will probably have the largest slowdowns in price increase in the first half of 2019.
Redfin predicts the homeownership rate will rise rapidly in 2019 as speculators and investors exit the market. Fairweather expects mortgage rates to rise to 5.5 percent by the end of 2019.
According to Zillow, rising mortgage rates are encouraging homeowners to stay put and discouraging would-be buyers.
“Rising mortgage rates may likely soon set the scene for the home market in 2019,” said Aaron Terrazas, senior economist at Zillow. “They will affect everybody, driving up costs for home buyers and creating more demand for rentals. Even current homeowners may start to feel locked in their mortgage rates.”
Zillow anticipates mortgage rates will reach about 5.8 percent and home values will increase by 3.79 percent in 2019.
National Association of Home Builders
After a strong start last year, home-builder confidence fell to the lowest level in more than three years from the end of 2018. Several of the significant home builders downgraded their sales or orders forecasts for 2019.
“The market has slowed,” said Robert Dietz, chief economist for the National Association of Home Builders. “We’ve revised our forecast down.”
Builders face significant head storms because of the”five Ls” — labor, lots, laws, financing and timber. A labor shortage, lack of buildable lots, onerous regulations, rigorous funding and tariffs on materials such as lumber have increased their prices, says Dietz.
NAHB predicts new-home sales are going to be around 628,000, the same as in 2018. Single-family structure, including for-sale and not-for-sale homes, will increase nearly 2 percent from 2018 to around 900,000 units. Based on demographics, that’s 200,000 to 300,000 less than the market can absorb and well below the average number of starts pre-housing crash.
Builders have taken a great deal of heat for not building enough homes or constructing primarily luxury homes. But Dietz said there has been an uptick in townhouse structure, a more affordable single-family option.
“The market has been moving away from higher-end, higher-priced, larger homes over the last a couple of years into more entry level,” he said. “Our surveys show we have gone from a new building market that had been less than 20 percent dedicated to first-time home buyers now closer to 30 percent, which is nearer to historic standards.”
Mortgage Bankers Association
The Mortgage Bankers Association expects moderate growth in home purchase mortgage originations, together with refinance quantity continued to decrease. It anticipates the 30-year fixed-rate mortgage will level out at a 5.1 percent.
“The supply of homes for sale and lack of affordability continue to be challenges for the home market,” composed MBA economists Michael Fratantoni and Joel Kan.”Despite the anticipated cool down in economic development, we anticipate that housing demand will remain strong, mortgage rates will soon stabilize, wage growth will likely increase and home price growth will moderate, providing favorable conditions for growth in the home purchase market.”
Greg McBride, Bankrate.com’s chief financial analyst, predicts the 30-year fixed rate will probably pass 5.25 percent before going into a swoon late in the year to finish around 4.35 percent.
As the Federal Reserve dismisses its balance sheet and pushes upward short-term interest rates, HELOCs (home equity line of credit) might be affected because many are tied to the prime rate, that follows the Fed’s benchmark rate.
“Each rate increase means the minimum payment on a $30,000 home-equity line increases by $6,” McBride said. “I expect the Fed to raise rates twice next year, bringing the increase in minimum payments to $12.50 per month by year end.”
HELOC rates will rise and then flatten , McBride said. He expects the average HELOC rate to reach 6.85 percent from the end of 2019.
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