Even though sales are slowing and price growth is softening, will 2019 become a true buyer’s market?
Not according to Realtor.com’s latest economic forecast for 2019 and its chief economist, Danielle Hale. Continued rising home prices and rising interest rates will counterbalance any slowing sales and moderating price growth.
Lack of affordability will remain a fact of life and buyers and sellers will simply be forced to adapt to more expensive housing transactions. How much more expensive? Realtor.com’s 2019 forecast projects housing transactions to be +8% more expensive next year when compared to 2018.
“Unless there is a major shift” in the country’s economic trajectory, Hale does not anticipate a true buyer’s market within the next five years. Realtor.com’s forecast projects interest rates to average 5.3% in 2019 and to hit 5.5% by the end of the year. Hale speculates that rates could reach 6% – 7% during the current business cycle. “(Even though) mortgage rates seem high (now)…they are still below where we’ve seen them for most of history.”
Realtor.com’s forecast projects less competition for houses and fewer bidding wars. It also projects that “sellers who price their homes competitively can still walk away with handsome…profits, but not the price jumps observed in the previous years.”
Of course, every market will respond individually to Realtor.com’s projected economic trends. Some high-growth markets such as Boston, Seattle and San Jose, are expected to see double-digit inventory gains rather than the anticipated modest inventory gain of 7% nationally. Other markets, such as Denver, Boise and Las Vegas, are projected to see price growth rates of +6.8%, +6.9% and +7.9%, respectively. The Realtor.com forecast also anticipates price growth rates of +6.2% in Sarasota, +6.3% in Daytona Beach and +7.4% in the Lakeland-Winter Haven metro area.
Despite continued affordability challenges, Hale does not see consumers, especially Millennials, shying away from the housing market in 2019 and beyond. “…Millennials are quick to recognize that buying a home is a way to build wealth in the long run.” And with Millennials coming into their “peak home buying year” in 2020, according to Realtor.com’s 2019 economic forecast, this largest home buying demographic ever, 45% of the market in 2019, is predicted to drive the housing market well beyond next year.