US HOUSING MARKET FORECAST 2019 AND BEYOND: WHAT YOU NEED TO KNOW


There’s no doubt that the 2018 US housing market has seen its ups and downs. The year started with sky-high house prices, historically low mortgage rates, and a definite seller’s market. In the last months of the year, however, property price growth slowed, interest rates rose to their highest point, and the market started shifting to favor buyers. Will these real estate trends continue in 2019 and later on in 2020? Here are our US housing market forecast and predictions from experts in the industry. Real estate investors, keep reading to learn key facts, data, price factors, expert opinions, and real estate trends to expect when buying an investment property in 2019.

House Prices Continue to Increase

The National Association of Realtors expects home prices to keep increasing through the year. However, according to new data, economists estimate that home prices will rise more slowly in 2019 than they did in 2018. Zillow’s forecast, for example, calls for the average property price to increase by about 3.8% nationally. On the other hand, Realtor.com has them rising at just 2.2%. Nonetheless, the fact remains that sellers are asking for prices that first-time home buyers can’t afford.

Based on NAR’s data, there were some interesting variations regarding this housing market forecast based on price and region. Home prices, of course, vary by region and local real estate trends. Therefore, some cities in the US real estate market might experience a large jump in prices while others could see relatively small gains. For example, the National Association of Realtor reported that house prices in the Northeast had an 8.2% jump over the last year while homes in the West rose only by 0.2%.

Source: National Association of Realtors

Moreover, the slower growth in home prices suggests that real estate appreciation will slow down in most parts of the US housing market 2019. This means that while prices will continue to rise, the days of easy price gains might come to an end. House price increase also indicates that most first-time home buyers in the US will continue to rent. This is good news for real estate investors with rental properties as it suggests strong rental demand. Not to mention that when home prices grow, so do rental rates.

Mortgage Interest Rates Continue Rising

According to Freddie Mac, the average rate for a 30-year, fixed-rate mortgage was 4.5% in 2018. While this is low by historical standards, it’s an increase from 3.9% a year earlier. Our housing market forecast and predictions suggest that mortgage rates will keep climbing even higher in 2019. Experts project the current mortgage interest rate will even exceed 5% by 2020! Both Realtor.com and Redfin estimate that mortgage rates will rise to 5.5%, while Zillow expects rates to reach 5.8% by the end of 2019.

Assuming that this actually happens, this will drive up home buyers’ borrowing costs and even shut others out of the housing market entirely. It seems that buyers are already sitting on the fence right now – based on data from the Mortgage Bankers Association, mortgage applications have dropped 5% this February compared to the same time a year ago. The rising mortgage interest rates combined with unaffordable property prices are also keeping existing homeowners from moving up on the property ladder.

The projected result: a cooling housing market and falling home sales nationally. As of February 2019, Freddie Mac data shows that the current mortgage interest rate is 4.37%. For a real estate investor, this means now might just be the best time to buy an investment property before rates start climbing up (if you’re looking to finance your investment with a mortgage).

Overall Home Sales Will Drop

As mentioned, the previous real estate trends will lead to our next US housing market forecast which is a decline in home sales. The demand for homes for sale is diminishing as lower-income buyers are struggling to buy at current prices and interest rates. According to Realtor.com:

As we look toward 2019, we are anticipating home sales to decline around 2%. We’re expecting it to be another slightly slower year as buyers continue to wrangle with higher mortgage rates after contending with several years of rapid price growth.

As of January 2019, home sales dropped 8.5% from a year ago which is the lowest home sales since 2015 according to the National Association of Realtors. NAR is not surprised to see the slide in home sales “given the government shutdown, slowing GDP, and employment numbers in January.” This housing market forecast, however, varies by region and house prices. For example, home sales of properties under $250k in the West dropped 29% in January. However, home sales of properties above $750k in the Northeast jumped an average of 18% according to NAR.

Source: National Association of Realtors

In addition, this housing market forecast 2019 is not all bad news for real estate investors. If you’ve found an investment property for sale, you’ll have less competition against home buyers who can’t afford to buy. This is also another indicator that more people continue to see that living in rental properties is more affordable than buying a home.

Millennials in the US housing Market 2019 and 2020

The rising mortgage interest rates aren’t slowing the millennial generation’s desire for homeownership. Yes, property prices and interest rates are making homes for sale less affordable. However, the oldest millennial will be turning 29 years old this year and entering the house-buying age as their needs adjust. Moreover, millennials still make up the largest segment of buyers (45% according to Realtor.com).

As a result, we can expect that demand from millennials will continue to unfold in 2019. But the housing market forecast to keep in mind is that 2020 will be the peak millennial home buying year. Furthermore, remember that supply and demand affect the housing market. So, this pent-up demand from millennials in 2020 is likely to move home values up across all price points.

While it’s too early to tell what could happen in the real estate market by 2020, real estate trends suggest millennials might face the same unaffordability issue as home buyers today. For real estate investors, this means that buying rental properties will continue to be a good investment in the US housing market 2020.

For more information, read: Millennial Homebuyers and the Real Estate Market.

Inventory Expected to Increase, But Not By Much

While home sales have declined in most of the US housing market, the number of homes put on the market for sale or newly constructed has increased slightly. According to the National Association of Realtors, new construction starts fell 11% in December 2018, but permits are now back up. This indicates that builders are feeling good about the housing market forecast and the economy again.

However, housing inventory in 2019 is increasing at a much slower rate than in 2018. This means that while the days of multiple offers and bidding wars may be over in some cities in the US where inventory is increasing, inventory is still likely to remain tight nationally in 2019, especially for entry-level homes. As a result, even though home buyers will have more options to choose from, house prices are still going to be expensive.

On the other hand, this could be in favor of real estate investors. Not only will you have more options for investment properties, but you can also expect the rental demand to remain strong in the coming years. To start your search for a lucrative rental property in your city, start out your 14-day free trial with Mashvisor now!

Housing Market Forecast: Buyer’s or Seller’s Market?

The above-mentioned real estate trends point to the fact that the US housing market is experiencing a slow-down this year – which is not a bad thing! According to Forbes, a slowdown in 2019 will create a healthier housing market going forward. However, while inventory will continue to increase, don’t expect the market to shift completely in favor of buyers any time soon. Experts in the real estate industry believe it’ll remain a seller’s market across the country for the next 5 years since the supply of homes for sale is not expected to exceed the demand.

Should You Expect a Housing Crash in 2019? 

Many worry about the possibility of a housing market crash in 2019. However, our housing market forecast does not include a crash. Experts predict the housing market will stay strong because the factors which led to the 2008 crash are not present today. The main difference this time around is that lending standards of financial institutions are stricter and homeownership rates are lower. Back then, everyone was buying a house – and sometimes more than one.

When it comes to the supply, there’s limited inventory in the US housing market mainly due to zoning laws and rising costs of housing construction. Neither of these factors is showing any signs of slowing. As for demand, the technology boom in some cities is driving incomes and wages, which gives home buyers a stronger purchasing capacity in these markets than in others. Meaning, the imbalance between supply and demand is what’s driving home prices in the US real estate market. As a result, if anything goes wrong, it’ll be a local problem and not a nationwide housing crash.

Should You Buy an Investment Property in 2019?

As a real estate investor, now you’re probably asking yourself whether it’s smart to buy an investment property this year. Based on our housing market forecast 2019 and 2020, the answer is YES! Rising prices and new construction support the positive economic outlook in the US. As mentioned, a real estate investor will find less competition as home buyers can’t afford to buy and will continue to rent.  In addition, the slow-down that the US is currently experiencing means now is the best time to buy a rental property.

If you are ready to be a part of the 2019 US housing market, use Mashvisor to quickly find profitable rental properties in the city of your choice and start making money in real estate. Click here to start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after!

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