2019 Housing Market Predictions

Borrowing, Home Purchase Loan


Is 2019 the year you finally buy that starter home? Are you upgrading or downsizing to a new home? Are you interested in how your home value is likely to change over the next year? We offer these 2019 housing market predictions to consider as you review your housing plans for the year.

Inventory Will Ease a Bit, but for the Wrong Reason ­– Inventory is expected to increase slightly but that increase will stay below 7%, according to Realtor.com. Unfortunately, that reflects people being priced out of the market as much as it reflects a supply of new homes. Growth in new home construction is expected to stay relatively flat, while overall demand is likely to decrease.

Inventory gains are concentrated in higher-priced homes and markets, implying that there are plenty of homes available for people who can’t afford them.

Talk of a recession starting as early as late 2019 may also scare off potential homebuyers who fear buying at the crest of a wave, as in the pre-2008 housing bubble. Demand will further decline, eventually moderating price increases.

Millennials Will Drive The Market – Millennials, your time has come. Realtor.com predicts that millennials will make up 45% of successful mortgage loans in 2019, topping the 37% rate of Generation Xers.

However, the generation may be split. Younger first-time homebuyers will struggle to find affordable homes to buy. Older millennials who are looking to upgrade will have more high-end homes to choose from.

30-Year Fixed Rates Above 5% Will Return – Given continuous Federal Reserve rate increases, analysts expected thirty-year rates to reach 5% in 2018 – and they may still with a December Fed increase. They’re virtually certain to surpass 5% in 2019 and are likely to peak around 5.3% to 5.8% by the end of the year.

Five percent is an important psychological threshold. Before March of 2009, average thirty-year fixed rates hadn’t been below 5% since the St. Louis Fed began tracking averages in 1971. We may not see 38 more years of rates above 5%, but the historically low post-recession rates are not coming back.

Prices/Appreciation Will Slow While Sales Drop – Realtor.com predicts the existing median home price will rise by only 2.2% in 2019 – and combined with higher interest rates and modest inventory increases in critical markets, existing home sales are predicted to fall by 2%.

With affordability on the decline, the trend of homebuyers leaving larger high-priced markets for more affordable smaller cities is expected to increase in 2019.

Homeowners can still expect a decent return on investment. As of October 31, Zillow estimates the median American home value at $221,500. They expect this year’s 7.7% rise in values will be followed by a more modest 6.4% in 2019.

Not Enough SALT In High-Value Markets – Homeowners in high-dollar, high-tax markets will feel the effects of the late 2017 tax bill that limits deductions on state and local taxes (SALT) to $10,000 – a number easy to surpass in property taxes in some markets. Buyers in high-end markets may face regrets when tax time arrives.

Overall, 2019 is likely to be a challenging year for the housing market, especially if you’re a first-time buyer – but plenty of homes sell even in the most challenging markets.

Demand may continue to drop, but a good deal on a home purchase will always draw a crowd. Stand out above the competition. Keep your credit score in the best possible shape and keep your overall debt low, so you can take advantage when the elusive good deal arrives.

You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

Photo ©iStockphoto.com/tanoy1412

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