In 2018, the housing market experienced its fair share of up and downs, attributed to many factors, including affordability and inventory concerns. The start of the year saw many markets with home prices still at their highest when viewed over the last 10 years and mortgage rates at an all-time low, which gave a definitive upper hand for sellers. During the latter part of 2018, home price growth faltered, the number of sales month over month fell, rates steadily rose to their highest point in nearly eight years, and inventory increased so the favor started to shift from seller to buyer.
In addition, many would-be homebuyers, deterred by high mortgage rates, chose to fix up their current homes rather than seek a new dream house. In the new build industry, “Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” National Association of Home Builders Chairman Randy Noel said.
However, in early December mortgage rates finally edged down – which experts align with the recent volatility in the US Stock Market…so perhaps homebuyers will be headed into 2019 with more confidence. Market trends for 2019 have experts providing predictions that offer little change to the conditions in the market currently.
A large number of millennial age group will be turning 29 this year, entering peak household formation and home-buying age which is anticipated to contribute heavily to the increase in first-time buyer demand. This typically would have a knock-on effect with the next group upgrading to more expensive homes, but if this is slowed by increasing interest rates, then the biggest problem will become affordability and lack of inventory in the entry-level market.
Experts predict that despite the recent decrease in mortgage rates, that they may start to rise again in 2019, which will obviously cause a further slowing of the market. On the positive side, this does allow home purchasers, who have struggled to buy in previous years, the opportunity of stability in both price and time to organize appropriate financing. Even if the slowing market allows for more inventory in the non-entry level markets, experts are still predicting that this will still not meet the demand for homeownership. This puts pressure on supply for first-time home buyers, allowing homeowners wishing to upsize into more luxurious homes to create more demand in each of the markets.
So, overall predictions have the medium and long-term prospects for the housing market to remain good, mainly because demographics are going to continue to support demand. A slowdown in 2019 creates a healthier housing market going forward.