The Great Recession of 2008 is firmly in the rearview mirror and the American real estate market has enjoyed healthy gains over the past seven or eight years. Will 2019 bring more of the same? Or is the industry setting up for a crash? Only time will tell – but this doesn’t stop experts in the field from casting their predictions on what the next 12 months have in store.
The Real Estate Market’s 2019 Outlook
This year will prove to be a transformative and influential year for the real estate market. While there probably won’t be any massive shifts, what happens in 2019 will set the table for significant developments in 2020 and beyond.
Having said that, here are some of the top predictions and trends:
1. Interest Rates Will Continue Their Climb
Ahead of the Fed’s rate hike announcement, interest rates on a fixed-rate 30-year mortgage fell 12 basis points from the previous week to 4.63 percent – the lowest rate since late summer. But rates have steadily increased over the past year and all signs indicate that they’ll continue to inch upward in 2019.
“Realtor.com estimated that the rate for a 30-year mortgage will reach 5.50% by the end of 2019, while real-estate firm Zillow estimated that it could hit 5.80% in a year’s time,” finance reporter Jacob Passy writes. “Mortgage liquidity provider Fannie Mae was more moderate, predicting that rates will only increase to 5% by then.”
2. It’ll Still be a Seller’s Market
Experts tend to agree that it’ll still be better to be a seller than a buyer in 2019. Demand will continue to outmatch supply, though the gap between these forces will gradually close.
If there’s any area where sellers will lose some leverage this year, it’s in high-end luxury real estate. Prices are beginning to plateau in this end of the market; buyers are a little hesitant to continue moving up in the midst of some uncertainty.
3. Investors Will Get Smarter
According to Green Residential, one of the top property management companies in Houston, two out of every ten Americans will purchase an investment property at some point. Yet half of these properties will be up for sale sometime within five years. And it’s almost always a result of poor cash flow projection.
Rental properties tend to hold strong during down markets – as the number of renters increases slightly – but investors are forced to be more stringent with their numbers. As the market prepares to enter turbulent waters in the next two or three years, investors will get smarter with which properties they invest in (as well as where).
4. Foreclosures Will Rise
According to housing analytics firm Attom Data Solutions, foreclosures are increasing again for the first time since 2015. This trend is particularly evident in cities that have been hit hard by natural disasters – such as Houston – as well as expensive markets like Los Angeles. It’s not time to panic yet, but this is certainly a trend worth keeping an eye on in the coming months.
5. No Bust This Year
Before the 2009 housing bubble burst, economist Bill Conerly had already used his proprietary formula to call it. Few listened, but he was right.
Over the past decade, Conerly has tweaked his formula and now looks at elements like interest rates, new construction, transactional volume, and home prices. And it’s his opinion that there won’t be a bubble in 2019.
“Rolling these elements together, I expect small declines in new housing construction in the coming years, but no bust,” Conerly writes. “We have not built so much housing that the price has to fall. In fact, it’s most likely to rise a little faster than it’s historical average rate of 4.6% annually, but less than the recent 6.5% rate.”
At the end of the day, even expert opinions are nothing more than educated speculation. The future surrounding the real estate market can only be characterized by one word: uncertain. Some are suggesting growth will continue, while others are adamant that another bubble is about to pop. Either way, the industry is in for some major changes in 2019. Only time will tell how these changes impact American homeowners and investors.