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Is the Housing Market Recession Ready?

affordabilityA slowdown in 2019 will create a healthier housing market going forward, says Tendayi Kapfidze, Chief Economist at LendingTree. In an article titled “What We Expect in Housing and the Economy in 2019,” he pointed out that while housing will slow down next year, it is not a cause for significant concern.

Kapfidze is optimistic about the medium- and long-term prospects for housing “as the demographics are going to continue to support demand. With a slower price appreciation, incomes have a chance to catch up. With slower sales, inventory has an opportunity to normalize,” he said.

LendingTree does not anticipate a recession this year on account of a strong labor market that will form the basis for growth. However, political tensions will add to uncertainty and volatility which may result in a loss of confidence and suppressed business and consumer spending. 

LendingTree’s forecast expects an increase in mortgage rates to as high as 5.5 percent in 2019. Home sales will contract marginally by 2 percent to 5 percent on an annual basis. Growth in home prices will moderate to about 3 percent year over year, with some localized decline. However, this will not lead to a national decline, the forecast indicated. It also pointed out that higher rates will affect homebuyer confidence. Growth concerns, driven by political risk and slower global growth could hold mortgage rates below 5 percent—breathing new life into the housing market, according to Kapfidze.

Speaking of home appreciation, prices are projected to drop regardless of what happens to interest rates and sales. Home price growth will moderate to about 3 percent year over year.

Wage growth is likely to reach 3.5 percent year over year. Abnormally low unemployment can cause a spike in inflation if wage growth approaches 4 percent, the article stated. Speaking of FED rate hikes, it indicated the likelihood of FOMC raising funds rate twice in 2019.

The consumer debt of 2018 stands at $14 trillion and will continue to rise this year. “However delinquency rates are low. Although lenders may somewhat tighten underwriting standards, a strong labor market and wage growth will keep delinquencies low and encourage lending and borrowing,” Kapfidze said.

The unemployment rate is expected to fall to 3.4 percent by year-end from 3.7 percent recorded at the end of 2018. GDP will drop to 2.5 percent in 2019 from 3 percent in 2018.

 

About Author: Donna Joseph

Donna Joseph is a Dallas-based writer who covers technology, HR best practices, and a mix of lifestyle topics. She is a seasoned PR professional with an extensive background in content creation and corporate communications. Joseph holds a B.A. in Sociology and M.A. in Mass Communication, both from the University of Bangalore, India. She is currently working on two books, both dealing with women-centric issues prevalent in oppressive as well as progressive societies. She can be reached at donna.joseph@thefivestar.com.
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