Housing Market Forecast 2019

Christmas crystal ball 2019 forecast for the UK housing market2018 has been a rocky road for the housing market with Brexit uncertainty, sky high prices and historically low mortgage rates, so what can home buyers, property sellers and investors expect from 2019?

In the last couple of months we have seen house price growth falter while interest rates have risen to their highest point in almost eight years. Rather than the seller having the upper hand, we are beginning to see a power shift from seller to buyer. It will be interesting to see if these trends can continue or whether we will see the same rollercoaster in the next year.

Here are some expert opinions on what might happen in the housing market in 2019.

Mortgage rates could continue to rise

The director of economic research, Aaron Terrazas for Zillow, predicts that mortgage rates will continue to climb. He said: “Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing. That will change in 2019, as the 30-year, fixed rate mortgage reaches 5.8% — territory not seen since the dark days of 2008, when rates were racing downward in response to the housing crisis.”

Millennials will keep buying – despite rising rates

A senior economist, Odeta Kushi, believes that this will not deter millennials.

“The housing market in 2019 will be characterised by continued rising mortgage rates and surging millennial demand. Rising rates, by making housing less affordable, will likely deter certain potential home buyers from the market. On the other hand, the largest cohort of millennials will be turning 29 next year, entering peak household formation and home buying age, and contributing to the increase in first time buyer demand,” she says.

Younger people are still buying homes with the range of schemes available to help first time buyers who may otherwise struggle with large deposits. Help to Buy schemes and Shared Ownership mean that it is possible for millennials to attain their own home with some compromises.

“Millennials will continue to make up the largest segment of buyers next year, accounting for 45% of mortgages, compared to 17% of Boomers, and 37% of Gen Xers. While first time buyers will struggle next year, older millennial move-up buyers will have more options in the mid- to upper-tier price point and will make up the majority of millennials who close in 2019. Looking forward, 2020 is expected to be the peak millennial home buying year with the largest cohort of millennials turning 30 years old. Millennials are also likely to make up the largest share of home buyers for the next decade, as their housing needs adjust over time.” Chief economist, Danielle Hale, for Realtor.com said.

Overall home sales will drop

Overall home sales could decline by approximately 2%. It should be a slightly slower year as buyers wrangle with still high mortgage rates after dealing with several years of rapidly growing prices.

Inventory troubles will ease, but not too much

Odeta Kushi believes that “The wave of first time home buyer demand will be met by somewhat higher inventory levels than in 2018. However, while the days of multiple offers and bidding wars may be history in some markets where inventory is increasing, inventory will likely still remain tight nationally through 2019.”

The number of homes being marketed or newly built has increased slightly but the pace of sales has slowed a little which helps stop the inventory decline. The inventory increases or slowing price increases necessary for a widespread sales gain are not expected to happen next year.

Individual and institutional investors will battle it out

Brian Spitz, founder of Bigstate Home Buyers, has reported that “Institutional buyers that are well funded have tremendous advertising budgets and their spending makes it very hard for the average investor to compete in the market. As with all marketing campaigns you need some serious investment to get off the ground and to accurately target your market to make the biggest impact. Just this alone gives the institutional investor the upper hand.  With interest rates increasing, this impacts the buyer who cannot really afford to move plus the individual investors looking to borrow money to buy or hold rental properties. This type of competition middle market is one that individual investors do not want to see.”

The end result?

It is predicted that the housing market will slow down a little next year but, as Tendayi Kapfidze, chief economist for LendingTree says, it might not be a totally bad thing for everyone.

“The medium and long-term prospects for housing are good, because demographics are going to continue to support demand,” he said. “With a slower price appreciation, incomes have an opportunity to catch up. With slower sales, inventory has an opportunity to normalize. A slowdown in 2019 creates a healthier housing market going forward.”

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