Real estate agents and housing experts alike are completely flummoxed by December 2018’s -6.4% drop in existing home sales. Everyone is looking for an answer to this brow-raising reality and everyone has a different answer.
When first thinking about this -6.4% drop in existing home sales, Lawrence Yun, the chief economist with the National Association of REALTORS® (NAR) mused that rising interest rates were the culprit. Upon further consideration, Yun said, “This latest decline is harder to explain (than a change in governmental policy.) Perhaps it is a decline in consumer confidence that has been occurring in the latter half of 2018.”
Others think that, due to home prices starting to come down a bit while interest rates are expected to go up, potential homebuyers in December 2018 (and going forward) were concerned their new home value would depreciate as soon as they bought it and therefore didn’t buy it.
NAR’s 2019 president, John Smaby said he did not thing the partial government shutdown on December 22 had a significant effect on December 2018 closings but “…the uncertainty of the shutdown (from December 22 on) has the potential to harm the market.”
What does 2019 hold for the housing market?
Joel Kan, vice president of economic and industry forecasting with the Mortgage Bankers Association (MBA), said, “Many potential homebuyers still face affordability challenges but we expect this to dissipate slowly as there have been more signs of moderating home price growth and accelerating wage growth.” Kan is “cautiously optimistic that the spring home buying season will bring better news…” than December 2018’s sales figures due to a recent pickup in mortgage applications and to expected lower mortgage rates.
Cheryl Young, the senior economist with Trulia, is not as optimistic as Kan. Young said, “Looking ahead to 2019, expect weaker existing home sales as the New Year ushered in the government shutdown and worsening economic uncertainty.”