9 Housing and Mortgage Trends to Watch for
Houston Residential Mortgage
It’s going to be a challenging year for home buyers in 2019: They will continue to compete for a short supply of homes. Home prices and mortgage rates are likely to keep moving upward, bruising affordability.
But 2019 is likely to bring some welcome developments, too, for buyers and mortgage borrowers. Here are nine housing and mortgage trends to watch for in 2019.
1. Wanted: More homes for sale
Real estate has been a seller’s market for more than six years, meaning that there are more would-be buyers than homes for sale, sliding the balance of negotiating power in sellers’ direction. It will remain a seller’s market in 2019.
A prolonged seller’s market is not the ideal situation for home buyers. But the forecast contains some hope: The number of homes for sale is expected to rise. The problem is that the pent-up demand is still expected to continue to exceed supply, even with more homes for sale.
2. Home prices will keep going up
Home prices are expected to deliver a good news, bad news year in 2019.
First, the bad news: Home prices are predicted to keep rising. The good news is that most forecasters believe prices won’t rise as fast in 2019 as they did in 2018.
3. Mortgage rates will continue rising
From the beginning of 2018 to mid-December, 30-year fixed mortgage rates went up a little less than three-quarters of a percentage point, to around 4.75%. Forecasters expect mortgage rates to rise again in 2019 — but at a slower pace.
Keep in mind that these are predictions about where mortgage rates will end this year and end next year. In between, mortgage rates can bounce up and down.
4. Affordability still a concern
As home prices and mortgage rates rise in tandem, home buyers find it harder to afford homes.
Danielle Hale, chief economist for Realtor.com, says many markets are reaching the point where a typical home price is bumping up against affordability limits. She believes prices will eventually slow their increases to fall back in line with incomes. In 2019, she expects to see big sales increases in more-affordable areas.
5. New homes get smaller
From a home buyer’s perspective, most markets need more houses for sale, and they need to be on the affordable end of the price scale. After all, many first-timers buy starter homes instead of forever homes, with prices below the area’s median. There are signs that home builders are responding by building smaller, more affordable homes.
According to the U.S. Census Bureau, the median size of single-family homes started in the third quarter of 2018 was 2,320 square feet. That’s 4.9% smaller than the median size of new homes three years earlier, at 2,440 square feet.
Year-over-year median prices for new homes began decelerating in spring 2018. At $309,700, the median price of a new home in October was 3.1% lower than the median new-home price 12 months earlier. But Fannie Mae and NAR predict that new-home prices will rise in 2019.
6. First-time buyers dominate
The mortgage and real estate industries are focused on serving first-time home buyers, and for good reason: “First-timers have dominated the mortgage market for the past 10 years, and their share today is still high," according to an Urban Institute report published this summer, which adds: “We don’t see this changing anytime soon."
Before the housing crisis, first-time home buyers took out about 40% of purchase mortgages, according to the institute. Lately the first-timer share has been about 60%.
Tian Liu, chief economist for Genworth Mortgage Insurance, says 80% of the growth in home sales in the past three years has come from first-time buyers, and the reason is simple: They represent years of pent-up demand.
7. Lending standards ease a little
Mortgage lenders learned an enduring lesson in the housing crisis a decade ago: Make sure borrowers can repay their loans. So lenders tightened mortgage standards, partly on their own and partly in response to a regulatory crackdown on risky mortgages. These changes made it harder to get a home loan.
8. More borrowers choose ARMs
It’s almost as predictable as May flowers following April showers: Whenever rates on fixed-rate mortgages go up, you’ll see more borrowers opting for adjustable-rate mortgages. It happened in 2018 and it could continue into 2019.
Borrowers choose ARMs because the initial rates on adjustables are lower than the rates on fixed-rate mortgages. This gives borrowers lower monthly payments in the first few years. ARM borrowers take the risk that their rates and monthly payments could climb when the rate-adjustment period begins.
9. Overconfident sellers could struggle
As mentioned before, 2019 will remain a seller’s market, where would-be buyers outnumber the supply of homes they can afford. But that doesn’t mean home sellers can expect bidding wars from desperate buyers.
That’s especially the case with people who are selling homes that are priced above the median for their local market.
Source: nerdwallet
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