Realtor.com Expects Tough 2019 for First-Time Homebuyers
According to Realtor’s estimates, mortgage rates will reach 5.5% by the end of 2019. In turn, monthly mortgage rates are anticipated to climb 8%. Because of this, would-be homeowners with smaller budgets may find themselves priced out of the market. This is notable as Millennials are expected to account to 45% of all home mortgages in 2019 compared to just 17% for Baby Boomers.
On the other hand, home price growth is expected to slow to 2.2% for the new year. Additionally, as some buyers drop out due to rising rates, those remaining will find a less competitive market. As a result, sellers may have to settle for closings below asking price as the likelihood of bidding wars will decrease in many markets.
Despite this Realtor’s Danielle Hale explains that 2019 will continue to be a seller’s market. She notes, “Inventory will continue to increase next year, but unless there is a major shift in the economic trajectory, we don’t expect a buyer’s market on the horizon within the next five years.” To Hale’s point, overall house inventories are looking to increase 7% with upscale inventories increasing at a much faster rate. Meanwhile Hale says, “Unfortunately for buyers, it’s only going to get more costly to buy, especially the most-demanded entry level real estate. To be successful, buyers should think through how they’ll adapt to higher rates and prices.”
Among the markets where the most inventory growth is expected are San Jose, California; Seattle/Tacoma, Washington.; Worcester, Massachusetts; Boston, Massachusetts; and Nashville, Tennessee. Each of these metros is likely to see double-digit gains in home inventory in 2019. One interesting note that Realtor tacked on to their report is that it was compiled prior to Amazon’s announcement that they’d be splitting their “HQ2” between Queens, New York and Arlington, Virginia. Considering that each of these facilities will bring 25,000 jobs to their respective areas, the housing markets in each location will almost certainly be affected in the new year.
If Realtor’s forecasts are correct, it seems that 2019 will be an interesting year for the housing market. While it may not be a buyer’s market yet, sellers aren’t exactly sitting pretty either — at least not those looking to offload their starter homes. On top of all this, there could also be some possible effects to be felt as taxpayers file under new standard deduction rules for the first time. In other words, whether you plan on buying or selling a home in the new year, don’t expect everything to go as planned and prepare yourself by having a plan B.