Realtor.com forecasts tougher road for home buyers and sellers in 2019
Photo / Maureen Milliken
Rising mortgage rates and home prices will make it more difficult to buy or sell a home next year, according to realtor.com 's 2019 housing forecast that was released today.
Rising mortgage rates and home prices will make it more difficult to buy or sell a home next year, according to realtor.com 's 2019 housing forecast.
The Santa Clara, Calif.-based subsidiary of News Corp. [Nasdaq: NWS, NWSA] announced today that the 2019 housing market nationally is projected to see modest inventory gains. But with mortgage rates expected to hit 5.5% by the end of the year, monthly mortgage payments will rise 8%, putting home ownership more out of reach, especially for younger Gen-Z, Millennial and other first-time homebuyers.
Upscale homes in high-growth markets, however, will provide more opportunities for buyers, according to the 2019 forecast.
Other findings of the realtor.com 2019 housing forecast include:
- Home price growth will continue to slow, with a forecasted increase of 2.2%
- Inventory increases will remain moderate with less than a 7% increase
- High-priced markets will buck the trend, with double digit inventory gains
- Millennials will account for 45% of mortgages in 2019 versus 17% for baby boomers
- New tax plan will be good for renters, mixed for homeowners.
"Inventory will continue to increase next year, but unless there is a major shift in the economic trajectory, we don't expect a buyer's market on the horizon within the next five years," said Danielle Hale, chief economist for realtor.com. "Unfortunately for buyers, it's only going to get more costly to buy, especially the most-demanded entry level real estate. To be successful, buyers should think through how they'll adapt to higher rates and prices."
What will 2019 be like for buyers?
Buying a home will be an even more expensive undertaking in 2019 as mortgage rates and home prices increase, realtor.com reported. Buyers who are able to stay in the market will find less competition as more buyers are priced out, but feel an increased sense of urgency to close before it gets even more challenging.
“Their largest struggle next year will be reconciling wants, needs and budget versus the heavy competition of 2018,” realtor.com stated. “ Although the number of homes for sale is increasing, which is an improvement for buyers, the majority of new inventory is focused in the mid-to higher-end price tier, not entry-level. Rising mortgage rates and prices will keep a lot of new inventory out of their budget and make it especially tough for first-time home buyers.”
What will 2019 be like for sellers?
Although it remains a seller's market, sellers will need to be mindful of their increasing competition and shouldn't necessarily expect to name their price and get it in full — a change from the past few years, according to realtor.com.
Above-median priced sellers, may find it will take longer to sell and require offering incentives, such as price cuts or other offerings, according to the forecast. With less demand in the market, there will be fewer bidding wars and multiple offers.
Key housing trends of 2019
National inventory increases will remain low in 2019 at less than 7%, the forecast stated. In the majority of markets, the number of homes being put on the market or newly constructed has increased slightly, while the pace of sales has slowed slightly, which has helped stop the inventory decline.
But realtor.com says the inventory increases or slowing price increases necessary for a more widespread sales gain are not forecasted to happen in 2019. While the situation is not getting worse for buyers, it's also not improving notably in the majority of markets.High-priced markets are a different story.
The majority of the inventory gains have been in upscale homes in high-growth markets, which suggests higher prices are incentivizing sellers, realtor.com stated.
Next year, realtor.com forecasts more high-end inventory growth in major metros with the largest increases expected in: San Jose-Sunnyvale-Santa Clara, Calif.; Seattle-Tacoma-Bellevue, Wash.; Worcester, Mass.-Conn.; Boston-Cambridge-Newton, Mass.-N.H.; all of which could see double digit gains in inventory in 2019.
Looking forward, 2020 is expected to be the peak millennial home buying year with the largest cohort of millennials turning 30 years old. Millennials are also likely to make up the largest share of homebuyers for the next decade as their housing needs adjust over time.
Tax plan remains a wild card for housing
In April 2019, taxpayers will go through the income tax process for the first time since the new tax plan, realtor.com reported.
For most renters, it said, the results will be good: lower rates and a higher standard deduction should amount to lower tax bills. For homeowners, it's a mixed bag. Some will benefit from lower rates and a higher standard deduction, but many others will find limited itemized deductions and personal exemptions mean a higher tax bill.
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