Rising mortgage rates, slower home sales, and urban booms happening in cities across the country— what does all of this mean for the state of this year’s housing market?
The Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) looks at housing-related experiences and expectations from a consumer’s perspective. We’ll take a look at what their survey revealed about home prices, housing outlook, and mortgage rates for 2019.
Home Sales and Prices
The SCE looks at expectations for the change in home prices on both one-year and five-year time lines. According to the survey, the anticipated average home price change fell slightly on both counts, compared to last year’s survey.
The National Association of Realtors is expecting the median home price to increase by about 3% in 2019. They also expect home sales to increase 1% year-over-year. According to Opendoor’s analysis of the current housing market, home prices and sales are still rising overall, but the rate of growth in these areas has declined over the past couple of years since peaking in 2017.
Experts expect that 2019 will see a continuation of this trend. In recent years, most houses that went on the market sold very quickly—often at above the listing price. This year, the markets have a chance to breathe a bit more. That means that buyers are more likely to find homes available, and that they have more negotiating power when it comes to price.
Overall, people view real estate as a good investment decision this year. According to the SCE, 65% of all respondents thought that buying property in their zip code would be a “very good” or “somewhat good” investment. These numbers are roughly even with the consumer housing outlook from 2018.
According to Forbes, 2019 household budgets are very robust. Thanks to a strong labor market, the average household income is rising, people are able to save more, and average incomes are outpacing consumer debts. The healthy broader economic environment has helped support real estate investment in the last few years, and this trend is also expected to hold steady or rise.
Overall, consumers expect that mortgage rates will continue to rise in 2019. According to the SCE, households perceive that mortgage rates have risen by about 40 basis points since last year, which is consistent with the change in rates through December of last year.
One thing to keep in mind is that, although mortgage rates went up in 2018, they are still at a historically low level. According to the Federal Reserve’s Summary of Economic Projections for 2019, the current fed funds rate is projected to rise this year. As rates rise, there tends to be an increased demand for homes under $200k. Freddie Mac expects mortgage rates to finish at 4.9% by the end of the year.
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