What will the real estate market do in 2019?
Over the past few years, the real estate market has seen record highs, with major cities like New York and San Francisco, and in-demand areas like Southern California seeing top-of-the-market sales prices.
The booming market hasn’t been restricted to major metropolitan areas; in fact, smaller cities like Grand Rapids have seen population growth and expansion at record rates. But the question for buyers, sellers, and real estate professionals is: what will happen to the real estate market in 2019?
Job Growth Remains A Key Influencer
One of the driving factors behind higher home prices is a growing population. More people moving to the area means more home sales, and there is nothing that brings in new residents fast like job growth. It’s likely that unless there is a recession-like fall that demolishes employment opportunities, markets with growing populations will remain strong.
Slower Price Increases
2018 was the first year that the U.S. real estate market showed a bit of a slowdown, but mostly in sky-high markets like Southern California and Manhattan. If that slowdown is only a market correction, expect home sales to continue at a manageable pace with slower price increases. But, if it’s because of a larger downward trend, you could see fewer home sales and lower prices. How to know if that will happen in 2019? Keep an eye on Florida, California, and Texas during the spring months as these markets tend to start sales seasons earlier due to milder weather.
However, there are exceptions to this price increase slowdown; Realtor.com’s 2019 Housing Forecast anticipates an 8.2% growth in price increases in Grand Rapids, MI, the highest of any other market in the country.
More residents mean more new construction as inventory drops.
More New Construction
Certain housing markets have a limited supply of existing inventory; when there are fewer homes available for buyers to choose from, sellers can list at higher prices. Expect this trend to continue as populations grow in areas like Ann Arbor, Lansing, and Grand Rapids, while housing inventory drops. When this happens, you’ll likely start to see more new construction as builders and developers take advantage of fewer available homes.
Repercussions From The 2017 Tax Cuts and Jobs Act
With recent changes to tax law, homeowners may be feeling more of a financial impact then they expected. While they used to be able to deduct interest payments on loans up to $1,000,000, that benefit has been capped at $750,000 for mortgages after 2017. As tax refund checks come in, expect more people to be hesitant about upgrading given the drop in tax relief.
Rising Interest Rates
The majority of lending professionals agree that interest rates will likely increase again in 2019. Given that even then rates will still be relatively low, it’s likely that a rate hike alone won’t impact the housing market too much. But, higher rates can scare off potential buyers, which leads to more inventory and lower prices.
Clearly, your location will determine whether you’re impacted by changes to the housing market, but wherever you are, you should find a lender you trust when it’s time to buy a home. Answer a few questions here, and a home lending expert will contact you with more information.