Dear Friends and Clients —
It’s officially 2019, which means now is the time to look ahead, to make new plans, to achieve new dreams. And if those dreams include buying your own home, you should keep an eye on the ever-changing tides of the housing market. Now, markets are like the weather: You can’t entirely predict how they will act, but you can get a sense of the forces that will push things in one direction or another.
The realtor.com® economic research team analyzed a wealth of housing data to come up with a forecast of what 2019 might hold for home buyers and sellers—and it looks like both groups are going to be facing some challenges.
Here are the top four takeaways. For more information, see the full realtor.com® 2019 forecast.
1. We’ll have more homes for sale, especially luxury ones
We’ve been chronicling the super-tight inventory of homes for sale for several years now. Yes, homes have been hitting the market, but not enough to keep up with the demand. Nationwide, inventory actually hit its lowest level in recorded history last winter, but this year it finally started to recover. We’re expecting to see that inventory growth continue into next year, but not at a blockbuster rate—less than 7%. While this is welcome news for buyers who’ve been sidelined, sellers must confront a new reality. Although next year’s inventory growth is expected to be modest nationwide, pricier markets will tell a different story. In these markets—which typically have strong economies (read: high-paying jobs)—most of the expected inventory growth will come from listings of luxury homes.
2. Affording a home will remain tough
It’s no secret that home sellers have been sitting pretty for the past several years. But is the tide about to change in buyers’ favor? In some ways, life is going to be easier for home buyers; they’ll have more options, but life is also going to be more difficult for home buyers, because we expect mortgage rates to continue to increase, we expect home prices to continue to increase, so the pinch that they’re feeling from affordability is going to continue to be a pain point moving into 2019.
3. Millennials will still dominate home buying
Just a few years ago, millennials were the new kids on the block, just barely old enough to buy their own homes. Now they’re the biggest generational group of home buyers, accounting for 45% of mortgages (compared with 17% for baby boomers and 37% for Gen Xers). Some of them are even moving on up from their starter homes. As we mentioned above, things will be tough for those first-time buyers. But the slightly older move-up buyers will reap the benefits of both their home equity and the increased choices in the market.
4. The new tax law is still a wildcard
At the time of last year’s forecast, the GOP’s proposed revision of the tax code was still being batted around Congress. While there was talk that it might discourage people from buying a home, no one really knew how it might affect the real-estate market. This year … well, we still don’t really know. That’s because most taxpayers won’t be filing taxes under the new law until April 2019. And while some people might have a savvy tax adviser giving them a better idea of what’s in store, for many, the reality check will come in the form of a bigger tax bill—or a bigger refund. Renters are likely to have lower tax bills, but might not be tempted to buy while affordability remains a challenge, and with the new, increased standard deduction reducing the appeal of the homeowner’s mortgage-interest deduction.