2019 Housing Forecast

In 2018 the housing market was defined by rising home prices, increasing interest rates, and low inventory, but some of that could change in 2019.

January 22, 2019

In 2018 the housing market was defined by rising home prices, increasing interest rates, and low inventory, but some of that could change in 2019.

In November 2018, the average existing-home price was $257,700, which marked 81 straight months of year-over-year gains in home prices, according to the National Association of Realtors (NAR). While housing inventory saw a small increase that month, homes still didn’t last long on the market. The NAR reported the average property typically stayed on the market for 42 days, and 43 percent of homes were on the market for less than a month.

With 2019 almost a month in, will the housing market see its current conditions continue, or will there be more opportunities for interested buyers? Here’s what you need to know:

Interest rates could continue to rise:
- Mortgage rates have gradually increased after starting below four percent when 2018 began. According to Freddie Mac, the current average for a 30-year fixed-rate mortgage is 4.45 percent.
- Two more rate hikes were previously expected for 2019, but that might not necessarily be the case anymore. Market projections currently aren't factoring in one rate hike for the new year.
- The Federal Reserve finished out 2018 by raising the benchmark federal funds rate by 25 basis points, up from 2.25 percent to 2.5 percent. The benchmark federal funds rate is the interest rate at which banks lend money to each other.

Home price appreciation could taper off:
- If inventory levels continue to increase at a sustainable rate, then price growth could ultimately slow down. One projection from Ruben Gonzalez, chief economist at Keller Williams, suggests appreciation could drop to 3 percent next year.
- For buyers who have been battling rising home prices and interest rates, this could be a good thing. While 2019 might not be a true “buyer’s market,” the conditions could certainly give buyers a bit more leverage than in years past.

Supply might remain tight in 2019 and demand could drop:
- A potential decrease in demand combined with a slight increase in inventory could result in fewer bidding wars and could prompt motivated sellers to reduce their asking price.
- It’s important to note that a significant amount of inventory growth has occurred in higher-priced markets, this means there might not be an influx of starter homes available for first-time homebuyers.
- Housing inventory could increase slightly in 2019, but supply will likely remain limited in most markets. Increased interest rates also could discourage prospective homebuyers, leading to a drop off in demand.