2019 housing market forecast: should you buy a home?

2019 Housing Market Forecast: Should You Buy a Home This Year, or Wait?

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August 6, 2019

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The first half of 2019 has already gone by in the blink of an eye. For economists, the year began on a note of uncertainty, and the housing market forecast looked bleak. Would 2019 be a good year to buy a home? Or were we teetering on the brink of another housing crisis?

While many predicted rain, the 2019 housing market forecast has been more like a partly cloudy sky. Not bad, but not great, either.

What does that mean for homebuyers? Is this a good time to settle down, or should you wait until 2020 and beyond?

The truth is, no one can make perfect predictions of financial markets – there are simply too many different variables at play. That being said, it doesn’t hurt to try to make educated guesses about the future. And because we already have 6 months of 2019 to look back on, that makes it easier to guess how the next 6 months will go.

By looking at what we already know about the 2019 housing market and comparing expert predictions, we’ve put together a comprehensive housing market forecast to help you buy (or not buy) wisely.

What We Know (So Far)

Before we make any speculations, let’s look at 5 things we already know about the 2019 housing market.

1. Interest Rates are Lower Now Than They Were in 2018

In the United States, mortgage interest rates are holding at historic lows. Since the 2008 housing crisis, highs have stayed below 6% for 30-year mortgages. For comparison, interest rates in the 1990s could range anywhere from 6% to 10%.

At the end of 2018, mortgage interest rates were peaking close to 5%. So far, 2019 has seen mortgage rates between 3.75% and 4.50%.

While changes within this range have been very slow and steady, it’s still important to check rates daily. That’s because a fluctuation as small as 0.1% can have a pretty significant impact on your pocketbook long-term.

For example, say you take out a $200,000 30-year fixed-rate mortgage with an interest rate of 4%. You’re looking at monthly payments of $954.83 over 30 years, bringing your real loan cost up to $343,739.01 without refinancing.

Let’s say that rate goes up by 0.1% the next day. On that same $200,000 30-year fixed-rate mortgage, you’re now paying 4.1% interest. That brings your monthly payments up to $966.40 and your total payment over 30 years up to $347,902.83.

So, with an interest rate of 4.1%, you end up paying an additional:

  • $11.57 per month
  • $4,163.82 over 30 years

What does that mean for you, the homebuyer? Should you sit around and wait until mortgage rates go down? How can you be sure that they won’t just keep going up and up, making you wish that you’d locked in a lower rate months ago?

Just like the stock market, no one can make 100% accurate predictions on the future of interest rates. If it was easy, housing authorities wouldn’t spend so much time trying to figure it out!

The only thing that we know for sure is that so far is that mortgage rates in the summer of 2019 are the lowest we’ve seen in nearly two years, which means this could be the perfect time to buy or refinance.

2. It’s a Seller’s Market

Bad news for buyers – the majority of the US housing market is a seller’s market right now. That means that there are more buyers than there are homes for sale, giving sellers more power to negotiate.

During the Great Recession that occurred between 2007 and 2009 and the recovery period that followed (up until 2012), it was a buyer’s market. But now that the market has recovered, housing prices are up 50% from 2012 and buyers are at a bit of a disadvantage.

Will house prices continue to rise, or will market forces push them back down? That’s the big question economists are asking.

3. It’s Still a Tough Market for First-Time Buyers

For first-time buyers, a shortage of affordable housing has made achieving the American dream difficult in recent years. While the country’s supply of starter homes has been on the decline, the supply of luxury homes priced above $750,000 has increased.

The lack of affordable housing isn’t the only thing young homebuyers can blame – a combination of a high student loan debt, static wages, and high rent costs play a role, too.

Despite these difficulties, millennials are purchasing the most homes, making up 45% of mortgages. As more millennials reach the peak home-buying age of 30, we’ll see that percentage increase in 2019 and 2020.

4. Location Plays a Big Role

Real estate markets can vary wildly by neighborhood. While we’re talking about national averages and trends, you might find a very different market where you’re looking.

For example, housing prices have outpaced wages in places like San Diego County in California and Miami-Dade County in Florida. It isn’t just major metropolitan areas, either – one study found that home prices rose faster than wages in 80% of US markets.

If you’re looking to jump into a fast-growing housing market, get away from the coastline and look further inland. More people are moving out of overpriced cities like New York and Los Angeles to up-and-coming cities like Boise in Idaho and Salt Lake City in Utah.
Do your research and talk with real estate agents who know your local market – they’ll have the best idea of what’s to come.

5. Winter is Still the Best Time to Buy

No matter the year, there’s one thing that market analysts can agree on – you’ll usually get a better deal if you buy in the winter than if you buy in the summer.

This effect is much more dramatic if you live in an area with cold winters, but across the country, you’ll find that there’s less competition from other buyers during the holidays. First-time buyers should start house hunting in the fall and wait to make an offer in November, December, or January.

Popular Predictions

Now that we know the current state of the market, we can try making some predictions about the housing market forecast for the remainder of 2019. Here are 3 of the most popular predictions experts are talking about:

1. A Fed Rate Cut Could Drive Rates Down Even Further

In an upcoming meeting of the Federal Reserve on July 30th and 31st, analysts predict that the Fed is going to cut interest rates in order to keep up period of expansion that we’re currently in.

What does a Federal Reserve rate cut mean for mortgage rates?

Essentially, any type of rate cut makes it easier to borrow money – you’d be able to get a better rate on a mortgage loan. However, this could also push housing prices up. We’ll just have to wait and see what the Federal Reserve decides at the end of July.

2. Home Prices Will Continue to Rise (Slowly)

As long as demand stays high and supply stays low, home prices will continue to rise. They aren’t rising as quickly as they did in 2018, but could start to heat up if mortgage rates fall. Basically, if you want to buy a home this year, you should probably do it sooner rather than later.

3. Inventory Will Increase

Trulia’s Inventory and Price Watch report for Q1 of 2019 saw starter home inventory actually rise 3.5% year over year, which is good news for first-time buyers. While this inventory growth won’t push prices down in every market, there’s certainly a chance it could help in certain ones.

Even if prices don’t go down where you are, more inventory means less competition, giving you the luxury to take the home buying process a little bit more slowly.

The Big Question: Could We See Another Recession Anytime Soon?

With the Great Recession still so fresh in our memories, everyone wants to know: is the next housing market crash right around the corner? Could it be as soon as 2020?

Possibly, according to a Zillow prediction made in May of 2018. That’s because the economy is cyclical, going back and forth between periods of expansion (growth) and contraction (decline).

We’ve been in a period of recovery and growth since late 2008 – the longest period of growth in US history. Many economists believe that streak could end soon, with 49% of respondents in the Wall Street Journal’s Economic Forecasting Survey saying they expect a recession to begin in 2020. Another 36.6% say that it won’t be until 2021.

As scary as it sounds, especially for those who were hard hit by the last recession, economists say that it will not be nearly as severe. The housing market is not overheating like it was in 2007, and experts predict an economic downturn more similar to the 2001 recession.

The Most Important Factor to Consider: You

You could spend all the time in the world researching interest rates, supply and demand, and professional housing market forecasts, but there’s one factor that’s more important than any of that – you.

At the end of the day, such a huge investment is a personal decision. Are you in a good place to buy a home in 2019?

Even if all of the nation’s top economists came together and said that 2019 was the best year for buyers since 2012, it wouldn’t be wise to buy a home if you weren’t in the right financial position to do so.

Before you buy, make sure that:

– You have good credit (unless you’re applying for an FHA loan, you’ll need a minimum score of 620)
– You have a low debt-to-income ratio (you aren’t running out of money and relying on your credit card at the end of every month)
– You have enough money saved up for a down payment (unless you’re applying for a 0% down payment VA loan)
– You are confident you can afford your monthly payments along with property taxes, HOA fees, repair costs, utilities, and other fees
– You are willing to live in the home for at least 5 years

Starter Home or Dream Home?

First-time homebuyers have another important question to ask themselves – should they purchase a starter home, or wait to buy their forever home?

The housing market forecast can play a big role in this decision – if housing prices are expected to rise, the dream home you’re barely able to afford now may become even more unaffordable down the road. On the other hand, if you purchase a starter home just before prices plummet, you could become stuck in your less-than-ideal home, unable to upgrade.

So, what should you do?

While both decisions have their ups and downs, you should never rush or act impulsively when it comes to home buying. A dream home can quickly turn into a nightmare if you’re in over your head financially. And remember, the more you’re able to put toward a down payment, the smaller the loan.

That being said, if you aren’t willing to sacrifice some of the qualities of your “dream home”, you’re going to end up renting for the rest of your life. Whether it’s giving up the pool or adding a few minutes to your commute, buying your (almost) dream home in 2019 while interest rates are relatively low and the market is stable is safer than risking higher rates and higher prices in the future.

The Takeaway

In summary, here are the key points to take away from this housing market forecast:

– First-time buyers still face hurdles to homeownership, but alternative lending options can help.
– Home prices are expected to keep rising slowly over the next several years.
– Current mortgage rates are about 2% lower than the historical average – waiting for an even lower rate could be risky. This year’s lower mortgage rates also make it a good time to consider refinancing if you already own a home.
– In addition to national trends, always research trends in your local market.
– No matter the market, the best time to buy a house is when you feel ready and have enough money saved for a down payment.

Explore Your Loan Options

If you’re hoping to become a homeowner in 2019, it’s important to understand your loan options. From traditional fixed-rate mortgages to non-conventional loans for those who are self-employed, there’s a loan out there that meets your needs.

For more information, email [email protected] or call (813) 750-0291 to get in touch with a lending professional. With mortgage loans ranging from $15,000 up to $3 million, we’ll help you find the best possible solution – no matter when you decide to buy.

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