The real estate industry has always had a direct correlation with US economic expansion. If we have learnt anything from the financial crisis of 2008, it is that property prices have the power to affect the global economy as well. Needless to say, it is important to be aware of the developments in the sector, even if you don’t intend to invest in it. 2018 has been synonymous with escalating home prices, historically lower mortgage rates and a seller-centric market.
However, 2019 promises to be different. Experts have made various interesting forecasts about the US real estate market, which is of interest for both buyers and sellers.
Growth, But at a Slower Rate
It has been more than a decade now, since the global recession of 2008, and US housing prices have managed to recover from the losses. Prices have increased with great momentum over the past 5-6 years; at a pace twice that of wages and inflation. According to a poll conducted by Reuters, this growth is expected to continue to surpass inflation levels over the next few years, albeit at a slower rate. Analysts also predict that the US housing market turnover has reached peak levels.
Gradual Shift of Power to Buyers
The Knoxville, TN, housing market was a seller’s market in 2018, with lower inventory and higher number of buyers, according to a report on WATE. If reports are to be believed, a rise in inventory is expected in 2019, which could bring down home prices. Homes will stay on the market for longer, and that will offer a lot of flexibility to buyers.
On the other hand, with interest rates climbing, house prices might continue to escalate. The US Federal Reserve is expected to raise interest rates at least 3 times in 2019. This means that we might see a gradual shift from a seller’s to a buyer’s market, according to a report on The Mortgage Reports. However, experts claim that a slow rate for house sales might be responsible for this. And, while buyers gain, a majority of the markets might not improve to a great extent.
Climbing Mortgage Rates
2019 is expected see the 30-year fixed mortgage rate rising to 5.8%; something that hasn’t happen since the 2008 crisis, as predicted by the Director of Economic Research for Zillow, in a report on Forbes. Climbing interest rates, the last of which was made by the Fed in December 2018, has already pushed the rates higher. This means that even with promises of higher inventory, affordable homes might still remain scarce.
Millennials Will Constitute the Largest Segment of Buyers
With falling unemployment levels and rising wages, millennials will be in the foreground in the housing market. Experts say that a huge percentage of the millennial population turns 30 this year; coming into the prime house-buying age. This means that millennials will remain potential buyers for at least the next 8 years. According to Realtor.com, millennials will account for 45% of mortgage payments, as compared to 37% of Gen X and 17% from Baby Boomers.
Technological Advancements Will Continue to Benefit Real Estate
Be it drones or blockchain technology, various technological advancements will continue to aim for better security, transparency, accessibility and ease of investment in the real estate market. Virtual reality and 3D viewing programs will offer potential buyers the chance to see properties that are in different regions or even countries.
Many start-ups have already leveraged the applications of distributed ledger technology to speed-up the documentation process and increase transparency between landlords and tenants. Some companies are exploring the option of providing residential sale leaseback, on a larger scale than ever before, according to an article on Penny Mac.
Whether these predictions actually fructify, only time will tell. The key is to do thorough research before investing in real estate, even at the best of times.