Home values last November were 5.1 percent higher than the previous year’s. This increase in value has experts predicting that the 2019 real estate forecast is bright and sunny for buyers.
Even though analysts predict a strong buyer’s market for 2019, there are other housing market predictions that favor those looking to sell as well.
With factors like the rising mortgage rates and a volatile stock market, it might feel difficult to make sense of this year’s real estate landscape.
That’s why we’ve pulled together all our resources to provide you with the comprehensive guide you need to succeed in real estate in 2019.
Whether you’re looking to buy or sell, here’s what you can expect from the housing market in the coming year.
Surging Millennial Demand
The biggest group of Millennials is nearing 30. This is part of the reason why they've been rushing to buy their first homes.
In fact, they now make up the largest group of home buyers in the country. They will account for 45 percent of home mortgages, whereas Baby Boomers will only take up 17 percent of that market.
Research shows that older Millennials will have more luck in the 2019 housing market if they’re looking to buy. This is because they’ll have more options in the higher price ranges than those looking for a starter home.
The group of buyers who are looking for their first home might have to compromise on a few things. A smaller house or a longer commute are the two most common compromises.
This is important for future markets as the Millennial migration to more suburban or even rural areas will have a large impact on the gentrification of certain areas. It will also lead to higher home prices in markets that were once very cheap.
Millennials also dominate the selling market, too. They’re the largest group of sellers in the country.
In fact, they're so quick to sell that 89 percent of them agree to include extras just to speed up the process. Including appliances or lowering the price are two popular ways they accomplish this.
Simply put, Millennials are big players in the housing market forecast as they hold a lot of the buying and selling power.
Unseen Effects of Renters’ Struggles
Previous years' forecasts have made note of the effects of renting on the housing market. This year, it's getting worse.
Renters spend close to 30 percent of their monthly income on rent. This is affecting the housing market more than it was previously thought.
People who are spending all of their income on rent can’t afford to save for a down payment on a home. This is obviously not so great for them.
However, it's great for others who are looking to take advantage of lower home prices.
If people aren’t able to save for down payments, then they can’t contribute to the housing market. Without as many buyers on the market, there is an excess of available homes.
What happens when there are too many homes and not enough sellers? It becomes a buyer’s market.
People have to compete to sell their homes at a price that buyers want. This is exactly the kind of market the real estate forecast predicts for 2019.
It’s great news for buyers, but renters remain in the dark. To combat this, we’ll have to take a look at interest rates on mortgage loans.
Interest Rates and Tax Traps
Mortgage interest rates have continued to increase over the past two years. They haven’t reached the high rates we saw during the 2008 housing crisis, though.
Experts think this might change in 2019. The fixed mortgage rate will likely rise to 5.8 percent. This is pretty (scarily) close to the rates during the recession.
This might deter some potential sellers from selling their home. Why? They’re locked into a pretty decent mortgage rate where they’re at.
Most homeowners are enjoying a 4.5 percent interest rate, which gives them less of a reason to sell their home and move. Again, this all contributes to less availability of for-sale homes on the market.
In a similar manner, people are waiting to buy and sell until they can see the effects of the new tax changes. Particularly, they’re waiting to see how the new cap on the mortgage interest deductions works for others.
Figuring out your real estate vs. property tax used to be the most confusing part about being a homeowner.
Now, you’ve got to factor in the newly-implemented yearly tax deductions. Homeowners with mortgage debt are only able to deduct interest on up to $750,000 in mortgage debt.
This is going to be a bigger problem for people in high-tax states. If you live in California, New York, Connecticut, or New Jersey, expect this to affect the market.
A Rise in Luxury Homes
In recent years, the number of homes for sale hasn’t been enough to really pump up the housing marketing. Now, it’s one of the top factors in real estate market predictions this year.
It’s not just about more homes, though. There are going to be more luxury homes for sale on the market.
This is because these markets target people who are benefitting from the strong economy. Those experiencing personal financial growth and high-paying jobs are participating in the housing market by buying and selling luxury homes.
Experts note that people in metro markets will feel this growth the most. Areas like San Jose, Boston, Seattle, and even Nashville could experience double-digit gains in 2019.
The number of luxury homes in these markets will increase and help propel this high-end property market to new heights.
Unlike the high-tax states that have to worry about tax reforms, low-tax states like Colorado and North Carolina will see stronger luxury housing markets this year.
Dallas is heating up in the luxury market, and so are little towns all over Florida. If you’re looking to buy luxury this year, head to a secondary market. You’ll find better prices and larger, more luxurious homes.
Moving Away from the Tiny House Trend
Tiny houses have been popular recently simply due to their cheap price tag. The minimalist movement probably has something to do with it too.
What’s not to love about a tiny home? With a median price of about $60,000 and less space to clean and organize, it’s a homeowner’s dream.
Not exactly.
Consumers are just now beginning to understand the costs of owning and maintaining a tiny home. They’re also starting to understand just how hard it is to resell one.
The average construction cost per square foot is higher for a tiny home than a traditional one. This is because you have to cram everything into a smaller space. You’re paying less, but it’s only because you’re getting much less.
If it’s a pre-fab home, you can also bet on having to purchase land or some sort of travel trailer to haul it around with you wherever you go. These associated costs build up, and homeowners are getting savvy to the game.
It’s simply not worth it for most buyers. Those trying to sell their tiny homes in the current real estate market understand why. They cater to a very niche audience that’s hard to target.
You can't expect a tiny home to appreciate like a normal house. In a market that's still a little bit unstable, it's important to consider this when making an investment as big as purchasing a house.
For that reason, tiny homes look to be on the out in 2019. Instead, look for high-return housing investments that will provide you with stability in the long-run.
2019 Real Estate Forecast Recap
The real estate forecast for 2019 is shaping up to be in favor of buyers.
That is if they can take advantage of a competitive market. It’s a market led by high mortgage rates and lack of available homes for sale.
Higher mortgage rates are barreling towards the housing market. However, Millennials remain the top buyers and sellers.
They’re avoiding higher interest rates by opting for smaller homes that feature less of what they want.
What does this mean if you’re a seller?
Price your home fairly to attract buyers. You’ll have to keep in mind that you’re probably up against a lot of competition. If you need to sell faster, then add on amenities or include appliances.
What does this mean if you’re a buyer?
Take time to find the right home for you. There’s no rush because the market is in your favor. Try not to compromise on things you want and make sure you’re getting a good deal on your mortgage loan.
If you’re looking to buy or sell, let us help you find an agent. You can browse our list of qualified realtors in your area to get your home up for sale or sold in no time.