Going into 2019, there are all sorts of opinions about the state of the housing market and whether or not now is a good time to buy. Here are two such opinions, one by Matthew Gardner, chief economist with Windemere Real Estate, the second largest regional real estate company in the nation, and one from the National Association of REALTORS® (NAR) consumer confidence survey. Let’s begin by looking over Matthew Gardner’s shoulder into his crystal ball.
Gardner expects the US economy to have one more year of solid growth prior to a likely recession in 2020. Unlike the Great Recession ten years ago, Gardner expects the probable culprits in a likely recession to be the ongoing US – China trade war, the Federal Reserve raising interest rates too quickly, and/or excessive corporate debt levels. (Historically low interest rates enticed corporations to borrow just as those low rates encouraged us to borrow so we could buy houses and cars. Maybe we as individuals and corporations can’t really afford that heavy debt?)
Gardner had previously forecast home sales to come in 3.5% lower than home sales in 2017. Now he predicts home sale volume will rise modestly in 2019 by +1.9%. With the 2018 median sale price of $260,000, up +5.4% from 2017, Gardner sees 2019 median sales prices rising +4.4%. He sees new home sales volumes increasing by +6.9% in 2019. Such an increase would generate 695,000 units sold, the highest volume of new homes since 2007. Gardner sees new construction continuing to lag behind long-term averages and continuing its focus on higher –priced homes because of ever-rising labor, materials and land costs.
Though Gardner wrote his predictions prior to the December 19 announcement of the 5th consecutive quarter of interest rate hikes, he sees interest rates going to 5.7% by the end of 2019 and to 6% in 2020.
None of these prognostications particularly favor first time buyers. Still, Gardner believes that 2019 will be the “…ongoing resurgence of first-time buyers.”
The latest NAR consumer confidence survey indicates that housing customers see the housing market differently than Gardner. Only 34% of NAR survey respondents strongly endorse the idea of buying a house “right now.” This is down from 39% in Q3 2018 and down from 43% in Q4 2017. Consumer confidence in buying “right now” has not been this low since NAR started measuring consumer sentiment in 2015.
One of the main reasons why consumer sentiment toward home buying is so low deals with home prices. Between 2012 – 2018, median home prices have risen 44% while average wages have risen only 16%.
Findings from this latest NAR consumer sentiment survey suggest that homeownership is simply “out of reach” due to high home prices, lack of affordable options and the inability to qualify for a mortgage.
All Lawrence Yun, chief economist with NAR, could offer was to suggest that buyers “take advantage of communities in Opportunity Zones…communities that can draw real estate developers using tax incentives to build affordable housing.”
