As 2018 comes to an end, the housing market is showing signs of slowing down.
Throughout the year, observers began to speculate that the country's real estate market may have peaked. Meanwhile, millions of Americans continue to wait on the sidelines. Housing stocks remain extremely tight, which means that buying a home is a very expensive and difficult proposition for many. At the same time, expensive rents and low wages have limited people's ability to save for a down payment.
And 2019 seems ready to bring more of the same. "I would still prefer to be a seller than a buyer next year," said Danielle Hale, chief economist of the realtor.com real estate website. Here's what forecasters predict the new year will be for the US real estate market:
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Mortgage rates will continue to rise, causing housing prices and sales to plummet
As of November 21, the interest rate on a 30-year mortgage was 4.81%, 89 basis points more than a year ago. But at the same time next year, experts predict that it will be even higher.
Realtor.com has estimated that the 30-year mortgage rate would reach 5.50% by the end of 2019. The mortgage liquidity provider, Fannie Mae, was more moderate, predicting that the rates would n & # 39; 39 will only increase by 5% by then.
Whatever the case may be, homebuyers can expect to pay more interest if they buy next year. And rising mortgage rates will impact the entire market, "said Daren Blomquist, senior vice president of the real estate data company Attom Data Solutions.
"What's causing the slowdown in rising prices and rising inventories is not so much inventory creation, but declining demand," he said. "It's a housing market extremely sensitive to mortgage rates."
Realtor.com expects the median home price to rise 2.2% next year and sales to fall by 2%. (In October, the median selling price increased only 3.8% over the previous year, with a 1.8% annual increase in home sales, the first increase of type in six months.)
Adding inventory will not make it a market for buyers
In some of the country's most expensive markets, housing stocks have improved in recent months, easing some of the constraints associated with these stocks.
But that's not good news for buyers or sellers. The increase in inventories in this case is more the result of a drop in demand due to higher interest rates than a sign of new home construction.
For sellers, this change will result in fewer bids and bidding wars, which might entice some to feel obligated to lower their selling price. However, all of these factors will not offset the price appreciation of recent years. "If you sell, you'll still have a good chance of making a decent profit in 2019," said Hale.
In addition, the increase in inventories occurred mainly in the more expensive housing group, which means that the change does not directly benefit buyers. Rather, it could provide some leeway for people looking to improve their homes. In turn, this could slightly increase the number of startup houses on the market.
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People will continue to move away from expensive housing markets
A trend that has accelerated in 2018 has been the exodus of some of the country's most expensive housing markets. Millions of people chose to leave California, for example, and headed to the cities of Sunbelt such as Las Vegas and Phoenix.
This trend will not stop in 2019, which is good news for people looking to sell homes in small towns. "Homebuyers will look for affordability and often this will mean that we are moving from a major high-cost market to a less expensive secondary market," Hale said. Many of these cities, such as Raleigh, Nova Scotia, and Nashville, Tennessee, have growing economies and healthy labor markets, further softening the deal.
Another factor likely to fuel migration in the future is the new tax code signed by President Trump in 2017, which removed deductions for local and state taxes. Taxpayers will only feel the full impact of this change for the first time next spring, as they will receive their mailing check, said Aaron Terrazas, senior economist at Zillow Realty.
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"You've already witnessed some of the backlash from the tax bill during the elections that took place in New Jersey and in Orange County," said Terrazas. "Whether it stimulates migration or not, it's something that's happening quite slowly. People are certainly upset and vote. In fact, taking and moving is a whole new level of seriousness. "
The threat of a recession remains a big point of questioning
The economy is still strong, but we do not know how long it will continue. Economists have predicted that a recession could occur as early as the end of 2019.
Whenever this happens, the recession will certainly reduce housing demand and cause prices and sales to fall. The magnitude of these effects will depend on the magnitude of the recession. In short, the more the number of jobs lost will be high, the more the housing market will be hit hard.
And the real estate market can start feeling the recession even before it starts. With memories of the pre-2008 housing bubble still in the minds of potential buyers, potential buyers may be reluctant to buy a property if they think they would buy at the top of the market.
"This could be more detrimental to the housing market than the real underlying problems," Blomquist said.