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Posted by on Jan 7, 2019 in Forecasts, Jim's Take on the Market | 1 comment | Print Print

2019 Forecast Summary

A summary of the 2019 forecasts – they say mortgage rates will be above 5% this year, and that pricing will continue to go up too. Something needs to give, and the only thing left is the number of sales:

A year ago, several experts predicted the new tax law would cause a slowdown in the housing market.

So far, the limitations on mortgage-interest and property-tax deductions haven’t had a negative impact. Instead, rising mortgage rates and home prices are doing more to put a damper on the market.

Economic uncertainty brought on by global trade tensions, stock market volatility and the government shutdown also isn’t helping. In this environment, potential home buyers can be reluctant to make a large purchase such as a house. The last sustained government shutdown in 2013 saw a slump in home sales.

It is too soon to tell whether the recent decline is a temporary lull or a major pullback.

In their forecasts for 2019, real estate experts anticipate the housing market slowing down, but not stalling, with prices and mortgage rates moderating.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” said Doug G. Duncan, chief economist at Fannie Mae.

Below is a snapshot of what housing experts are forecasting for 2019.


The National Association of Realtors expects home sales to flatten and home prices to continue to increase, though at a slower pace.

The forecast for home sales will be very boring — meaning stable,” said Lawrence Yun, NAR chief economist.

NAR expects sales to increase 1 percent to about 5.4 million and the median home price to rise 3.1 percent to around $266,800 in 2019, and $274,000 in 2020.

“Home-price appreciation will slow down,” Yun said. “The days of easy price gains are coming to an end, but prices will continue to rise.”

Inventory continues to be a concern.

“All indications are that we have a housing shortage,” Yun said. “If you look at population growth and job growth, it is clear that we are not producing enough houses.”

Because of diminishing affordability from mortgage rate and price increases, forecasts a 2 percent decline in home sales. But buyers looking for high-end homes in pricey metro areas should have more options. expects price growth to slow, rising just 2.2 percent in 2019.

“Inventory will continue to increase next year, but unless there is a major shift in the economic trajectory, we don’t expect a buyer’s market on the horizon within the next five years,” said Danielle Hale, chief economist for has mortgage rates averaging 5.3 percent in the coming year and reaching 5.5 percent by the end of 2019, making the average home purchase 8 percent more expensive per month than 2018.


Redfin sees the housing market cooling in the first half of the year. Price growth will settle around 3 percent after reliably exceeding 5 percent since the start of 2015.

“There’s quite a bit of uncertainty around our price forecast,” said Daryl Fairweather, Redfin chief economist. “There’s a real chance prices could fall below 2018 level, putting up negative growth for the first time since 2011.”

Metro areas such as Seattle, San Francisco, Los Angeles, Denver and Portland, Ore., which saw the most price growth in the first half of 2018, will experience the biggest slowdowns in price growth in the first half of 2019.

Redfin predicts the homeownership rate will grow more rapidly in 2019 as speculators and investors exit the market.

Fairweather expects mortgage rates to rise to 5.5 percent by the end of 2019.


According to Zillow, rising mortgage rates are encouraging homeowners to stay put and discouraging would-be buyers.

Rising mortgage rates will set the scene for the housing market in 2019,” said Aaron Terrazas, senior economist at Zillow. “They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Even current homeowners could start to feel locked into their mortgage rates.”

Zillow anticipates mortgage rates will reach 5.8 percent and home values will grow by 3.79 percent in 2019.


After a strong start last year, home-builder confidence fell to its lowest level in more than three years by the end of 2018. Several of the big home builders downgraded their sales or orders forecasts for 2019.

“The market has slowed,” said Robert Dietz, chief economist for the National Association of Home Builders. “We’ve revised our forecast down.”

Builders face significant head winds because of the “five Ls” — labor, lots, laws, lending and lumber. A labor shortage, lack of buildable lots, onerous regulations, strict lending and tariffs on supplies such as lumber have increased their costs.

NAHB predicts new-home sales will be around 628,000, the same as in 2018. Single-family construction, which includes for-sale and not-for-sale homes, will increase nearly 2 percent from 2018 to around 900,000 units. Based on demographics, that’s 200,000 to 300,000 less than the market could absorb and well below the average number of starts pre-housing crash. From 2000 to 2003, the average was 1.3 million.

Builders have taken a lot of heat for not building enough homes or building primarily luxury homes. But Dietz said there has been an uptick in townhouse construction, a more affordable single-family option.

“The market has been moving away from higher-end, higher-priced, larger homes over the last two or three years to more entry level,” he said. “Our surveys show we’ve gone from a new construction market that had been less than 20 percent dedicated to first-time home buyers to now closer to 30 percent, which is closer to historic norms.”


Greg McBride,’s chief financial analyst, predicts the 30-year fixed rate will pass 5.25 percent before going into a swoon late in the year to finish around 4.35 percent.

As the Federal Reserve trims its balance sheet and pushes up short-term interest rates, HELOCs (home equity line of credit) could be affected because many are tied to the prime rate, which follows the Fed’s benchmark rate.

“Each rate hike means the minimum payment on a $30,000 home-equity line increases by $6,” McBride said. “I expect the Fed to raise rates twice next year, bringing the increase in minimum payments to $12.50 per month by year end.”

HELOC rates will rise and then flatten out, McBride said. He expects the average HELOC rate to reach 6.85 percent by the end of 2019.

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1 Comment

  1. From 12/23/18:

    “Suddenly the light turned off in the second half of the year, with sales tumbling down and inventory rising,” said Lawrence Yun, chief economist at the National Association of Realtors.

    Robert Dietz, chief economist at the National Association of Home Builders, said he expects single-family housing starts to grow less than 2%, down from about 4% this year and 8% in 2017.

    The housing market is “telling a story that the economy is slowing down,” Mr. Dietz said.

    Still, many economists say the housing market is likely to continue to ease gradually, rather than fall hard as it did a decade ago. Existing home sales posted their largest annual decline in seven years in November but climbed 1.9% compared with a month earlier. That suggests the market is stabilizing, albeit at a lower level than its heyday in 2017.

    “My best guess is the housing market really comes into a soft landing. That’s the best-case scenario,” said Ralph McLaughlin, deputy chief economist at CoreLogic Inc.

    But, Mr. McLaughlin cautioned, that best-case scenario depends on whether buyers and sellers start to panic as the market continues to slow, especially given how fresh the memories of the 2008 crash are.

    “Markets often follow animal spirits or psychology,” he said. “Sometimes a soft landing is perceived as a crash.”

    The more optimistic read is that if home-price growth slows, inventory continues to swell and mortgage rates stabilize that could give the housing market a brief second wind, as buyers rush back in before rates rise further.

    Mr. Yun said strong underlying demand, especially from millennials who were unable to buy homes when the market was frenzied, will help keep the market relatively flat next year. He expects home sales to decline 0.4%. He said home-price appreciation will likely slow to about 2.5%, down from about 5% this year.

    “We think 2017 will be the peak of this cycle” for home-price increases, said Doug Duncan, chief economist at Fannie Mae .

    The path for mortgage rates next year remains uncertain. Most economists expected them to top out at around 4.5% this year, but when they shot past that mark and close to 5% it had a larger-than-expected effect on the housing market. Economists now expect rates to end 2019 around 5.5%. The Federal Reserve raised short-term interest rates again on Wednesday, though it indicated it could slow the pace of rate increases next year, citing economic headwinds. That helped push the yield on the benchmark 10-year U.S. Treasury to 2.782%, down from about 2.830% before the Fed’s announcement, its lowest level since May. It has since rebounded slightly.

    But if rates continue climbing, that is likely to further chill housing demand, unless wage growth accelerates significantly. Mortgage lenders are reporting the lowest purchase mortgage demand expectations in the five-year history of Fannie Mae’s survey of mortgage lender sentiment, a signal of bumpy times ahead for the mortgage industry.

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