As of May, 64% of Americans said they were expecting an increase in property values over the next year.
Are they right? If so, what will this mean for buyers and sellers? What other factors will impact the 2019 housing market?
Whether you are a homeowner, house-hunter, or real estate agent, it is important to know trends will affect home values this year. Let’s take a look.
While home prices jumped 10% in 2017 and 2018, this year should see growth slowing to 1%. This is due in part to economic uncertainty, and partly to an increase in mortgage interest rates.
The average home price for the US is expected to be around $266,800 in 2019, and $274,000 in 2020. This means home prices are expected to rise by about 3% over the next two years.
Buyers may be able to be a little more selective when it comes to purchasing homes. Sellers may find themselves waiting a little longer for the right offer.
The slow-down may be a positive in the long-run, but it does indicate a stabilizing of the housing market. The bubble is not bloating itself for a burst the way it was twelve years ago.
Mortgage Interest Rates Increasing
Mortgage interest rates are climbing higher than they have been in ten years. There will be an average rate of 5% for a 30-year mortgage, and 4.4% for a 15-year fixed-rate mortgage.
Higher interest rates actually indicate a healthy economy. The Fed raises them in order to offset inflation when more people are willing to borrow and spend.
All-cash offers are becoming more common, and there is expected to be a decrease in buyers taking out interest-only loans.
Millennial Home Buyers
Home ownership is expected to increase as speculators and investors move out of the housing market. And the biggest cohort of buyers is now millennials!
In fact, a large segment of the millennial generation will be turning 29 this year, now the peak age for household formation and home-buying. Millennials will account for 45% of mortgages, as compared to 37% of Gen-Xers and 17% of Baby Boomers.
There will be a lot of competition for starter homes at lower price points. Older millennials, now in there mid and late-30’s, will have big selection of mid-to-upper tier homes to choose from.
The stocks of companies like Home Depot and Lowes are improving, indicating that many folks are updating their existing homes. Some of these are coming on the market priced a little higher, but move-in ready.
The increase in mortgage rates is expected to discourage some would-be first-time buyers. There is a growing demand for quality rental properties, leading to an increase in apartment-building construction.
As Baby-Boomers retire and downsize, there is also an increasing need for townhomes, which are being constructed in Sunbelt areas as well as less populated, remote suburbs.
Altogether, home construction is expected to increase by 8%, which is still not enough in some areas. Contractors would like to keep up, but there are currently not enough workers in the field.
As millennials make the transition from renting to buying, many are realizing they can’t afford the high price tags in beloved coastal cities such as New York, Los Angeles, or San Francisco.
Some are making the move to lesser-known cities such as Nashville and Austin, where they can live the city lifestyle for a more affordable cost. Others are moving out further suburbia, where townhomes and fixer-uppers abound, and a night out on the town is only a train ride away.
What This Means For Buyers
A home is a great investment. Before you buy, consider calculating the amount of money you spend each year in rent. Imagine getting that back with a profit in ten years!
Yet before you make that offer, you should set your budget. Think about how much you can afford to spend on housing each month, including taxes and utilities. You may have to make some sacrifices now to ensure your future security.
Remember that location is key. Do you have a strong school district and close proximity to stores, recreation, and medical care? You will always be able to change the paint colors and windows, but you can’t change where your home is situated.
What This Means For Sellers
Your house may be on the market a little longer than it would have been a year or two ago. Be intentional as you prepare your home for sale.
Keep in mind that millennial buyers are very Internet-savvy. You will want to have lots of quality photos and an open, clean appearance.
Millennial home-buyers are more interested in quality over size. Make your house look livable and environmentally-friendly. Energy-efficient touches, such as solar panels or smart technology and appliances, will be big selling points.
What This Means For Realtors
It is important to set realistic goals in high return real estate. If you are relatively new to to the field, it is probably not wise to expect to sell five houses every month.
Remember that word-of-mouth is still the best way to get leads. Keep your eye out for any retirees within your circle looking to sell small or nicely upgraded homes.
The best way to make money in real estate is to get listings that millennials will want to buy. Presenting yourself as friendly, knowledgeable, and flexible will go a long way toward growing your business.
The Friendly Housing Market
While 2019’s housing market is not expected to explode, it will continue to be a safe, profitable way to invest. An increase in construction and first-time millennial home-buyers make it a pivotal year in real estate.
For more information on the buying and selling homes, read our blog today.