Should You Buy a House in 2019? The Real Estate Predictions You Need to Know

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Whether you’re looking to invest in real estate or buy your first home, it’s tricky to understand the state of the housing market today.

Should you buy a house? Should you sell your current house? What kind of market is it? Can you even afford a house?

Here, we’re breaking down all of the top 2019 housing market predictions so that you know what kind of market you’re dealing with.

Mortgage Rates on the Rise

First things first: mortgages, the bane of every home buyer’s existence.

From the beginning of 2018 through mid-December, 30-year fixed rate mortgages went up three-quarters of a percentage point to 4.75%.

That’s on-trend for the past two years, with mortgages on a steady increase. However, they have remained lower than they were during most of the Recession and below average for the type of strong economic growth we’ve had.

Now, that trend is changing.

In 2019, the fixed rate 30-year mortgage is predicted to reach 5.8%, a rate not seen since the dog days of 2008 in the ugly dawn of the housing crisis.

More Houses to Choose From

Even with the rising cost of mortgages, buyers will still have more homes to choose from.

This should be a relief to home buyers who have struggled to find a home for the past few years–a common complaint was that there simply weren’t enough houses to choose from. In fact, the housing supply in the winter of 2017 was at a record low, fueling bidding wars and endless frustration for would-be buyers.

All of that is changing in 2019.

The shortage is expected to ease this year, but the increase will be skewed towards the mid- to high-end markets (houses priced $250,000 and up). This is especially true of newly built homes.

That’s good for move-up buyers. For first-time buyers, not so much.

If you’re looking to sell your home to take advantage of this trend, you can learn more here about selling your home in Tampa.

Not Enough SALT in High-Value Markets

Do you live in a high-income, high-tax market?

You’re going to feel the burn from the 2017 tax bill.

Specifically, you should be worried about the portion of the tax bill that limits deductions on state and local taxes (SALT) to $10,000 (a number that’s easy to surpass in the right markets).

And that means that buyers in high-end markets may face serious regrets when Tax Day rolls around.

Inventory Will Ease…For the Wrong Reason

Inventory is a big deal in the real estate market. It’s not the worst year for inventory in 2019, but it’s not the best, either.

In 2019, the housing inventory is expected to increase slightly, but that increase will stay below 7%. That reflects homeowners getting priced out of the market as much as it reflects a supply of new houses to the market.

In particular, these inventory gains will stay focused on one area: high-end homes and markets.

So, there are plenty of homes available…for people who can’t afford to buy them.

Add in the fact that growth in new home construction is expected to stay relatively flat as demand rises, and you’re looking at a somewhat sticky situation.

Millennials Will Keep Buying–Despite Rates

For the last few years, the word on the street has remained the same: Millennials aren’t buying houses.

Turns out, that may not be true anymore.

In fact, Millennials are the largest share of home buyers, making up 36% of the buying market, followed by Gen Xers at 26% and Baby Boomers at 18%.

That means Millennials will drive the market. But the market will still be split–older Millennials will have more high-end homes to choose from, but first-time buyers will struggle to find properties they can afford.

Either way, Millennials will continue to buy houses, despite those rising rates.

Rents Reverse Course

We’ve talked a lot about the home-buying market, but it’s also worth paying attention to the rental market, as well.

Rising mortgages will affect home buyers first, but renters won’t be far behind.

As home buyers on the edge of the market struggle to find houses they can afford, many of them will hold off and continue to rent. That means that recent drops in rent will reverse course.

However, this shift will be somewhat muted by the ongoing investment in apartment construction, leaving more apartment options on the market for would-be renters and thus preventing rates from shooting too high.

Individual and Institutional Investors at War

Wherever you fall on the spectrum, one feature of 2019 will remain constant: an ongoing battle between individual and institutional real estate investors.

Individual buyers only have their own resources. Institutional investors, on the other hand, have advertising budgets and spending room that makes it impossible for the average investor to compete.

Their budget also grants them the resource to target and identify acquisition properties in a way that the average investor simply can’t. Plus, individual investors looking to borrow money to rent and hold properties will be affected by rising interest rates in a way institutional investors simply won’t.

Inventory decreases and the cost to borrow increases alongside competition–a recipe for disaster if you’re an average real estate investor.

Affording a Home Remains Difficult

What does all of this mean for the overall 2019 market?

The long and the short of it is simple: affording a home remains as difficult as ever.

Housing values are expected to increase in 2019, but not at the breakneck pace of recent years. Where the last few years saw rates around 5%, this year rates are only predicted to hit 2-3%. Add in the rising cost of mortgages, and the market isn’t necessarily inviting if you’re struggling to make ends meet.

Should You Buy a House?

Will all of that in mind, should you buy a house in 2019?

That depends on your current financial situation and the market you’re looking to buy in.

If you need guidance figuring it out, we can help with that.

You can check out our home and mortgage calculators to see what you can afford or check out our blog for more useful tips, like this infographic on the pitfalls for first-time home buyers.

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