Redfin [1]’s Chief Economist, Daryl Fairweather, predicts the housing market will continue to cool into the first half of 2019. Among the seven predictions for the year ahead, Redfin forecasts a rise in homeownership rates and rise in inventory to be back at 2017 levels. Price hikes will record the lowest numbers since 2014.
Speaking of investors and house-flippers, Fairweather expects them to back away from the market. She noted that real estate companies that buy homes from consumers to quickly sell at a profit are likely to face challenges as the market cools. Local housing issues will have tech companies and local governments continue to “go head to head,” she said.
Redfin’s 2019 predictions anticipate price growth to stay around 3 percent in the first half of the new year, a drop from the 7 percent recorded around the same period last year. Though a booming economy and increased access to credit will drive homebuyer demand, higher interest rates will make homeownership an expensive affair for many—creating doubts about the rebound of home sales next year, the report said.
According to the report, more inventory and less competition will be key features of the market of 2019. Homeownership has been consistently growing from its post-recession valley of 63 percent in 2016 to above 64 percent this year. It pointed out that an increase in mortgage-rate to 5.5 percent by the end of 2019 would mean about a $100 increase in monthly mortgage payments on a $300,000 home.
The heat of rising rates will affect lenders as their costs of lending will lead to flattened demand for services—compelling lenders to reach out to low-income borrowers and first-time homebuyers, Fairweather wrote. Redfin also predicts fewer homes to be built and an uptick in starter homes that are easier to sell than luxury homes. The per-unit values of building permits will also decline in 2019. Low unemployment is projected to increase the wages for low-income workers, impacting both demand and supply and demand for housing, the report indicated.
Institutional buyers will face their first serious test wherein buyers who made money from nearly every sale in a rising market with low-interest rates could start to face losses if homebuying demand falters on account of higher interest rates and stock-market volatility, the report stated.
Read the full report here [2].