2019 Housing Market Forecast: Facts Not Fiction

Are Home Prices Headed For Another Crisis? Is another market crash on the horizon? Does the fact that listing and price adjustments are increasing in frequency, signal that we are headed into another 2007 market crash again?

Get Passed The Headline

One thing is clear, there’s a lot of chatter out there painting doomsday scenarios in real estate in the near future. I wrote this article in an effort to dispel these fear mongers with facts.

Keep in mind that apart from startling headlines designed to build online clicks, there’s little substance to support claims that we are falling headlong into another housing crash.

CoreLogic.com

Allowing the rate of home appreciation to continue to climb unchecked would indeed have spelled trouble for the market. With 2006/07 crash still fresh in our memories, we needed to slow the rate of appreciation down.

According to CoreLogic, 67% of metro area homes were way over valued until reaching it’s peak in late 2006 and into 2007 and spiraling downwards to it’s lowest point in 2011 through 2012 with 52% of homes undervalued. The correction and leveling off began in 2017.

CoreLogic.com

Like many industries, real estate follows the law of “supply and demand”. During 2017 and into 2018, when housing inventory fell below three month supply, demand was high. Home buyers were out in force wanting to take advantage of the low-interest rates and were often competing against each other.

Here’s an entertaining video on Supply & Demand

Some homeowners across the nation, saw prices rising 6-12% nationally and raised their prices accordingly.  Here in Michigan, home prices were up 6.5% in most areas.

A Healthy Correction

The two things this market needed was more listings to meet the demand of home buyers and a leveling off of prices to calm fears that we were headed into another bubble. What we are now seeing is a natural outcome of increased inventory. It’s basic economics, folks.

We saw this in the luxury market where home appreciation was much slower than the starter home market. During the past 18 months, the number of luxury listings was high. However, the largest portion of home buyers consisted of Millennials looking for their first home.

So, too many luxury homes for sale but not enough buyers resulted in a soft market. Fewer sales, longer days on market caused the home appreciation to slow right down. All the while, the starter home market ($150k – $250k) were selling in a matter of days and often with multiple offers which pushed sale prices above the listing price.

So you see that as the number of homes for sale continues to grow, the rate of price appreciation starts to decelerate. Some people see this and start to get nervous. Despite the fact, that in reality, this is exactly what the market needed. 

Frankly, what we are seeing is a slow down in price appreciation, NOT a depreciation. That’s right. The rate of price appreciation has slowed down and seems to be leveling off at around 6% nationally so homeowners will have to start adjusting their prices accordingly.

Is A Recession Coming?

Our current economy is booming. Jobs are plentiful and we are enjoying the lowest unemployment rates in ten years. Jobless claims dropped dramatically to record lows and we are starting to see wages starting to increase even as interest rates rise.

Gross Domestic Product (GDP) gross hit an all time high of 2.93% growth in 2018 compared to the previous high of 2.86% in 2015. The forecasted GDP growth for 2019 is 2.66%, compared to 1.49% in 2016 and 2.27% in 2017.

Eventually, the rate in which the economy is growing is going to slow down and we’re starting to see that with the GDP projected growth rate for 2019. Much of that has to do with rising interest rates.

In sharp contrast, unemployment peaked at 10% in 2009 and the nation’s economy suffered a loss of over 8.7 million jobs and homeowners losing over $16 Trillion in net worth.

After the damage was done, there were several economic stimulus measures put in place in 2010. The biggest jump towards full recovery came in 2017. As of December 2017, unemployment came in at 4% and now stands at 3.9% nationwide.

That’s not the case today. Referred to as the oracle of real estate and founder of Keeping Current Matters, Steve Harney states, “Prices are not going to crash, that’s not happening.”

Keeping Current Matters surveyed over 100 economists in the country and real estate professional and 98% are agreeing that prices will have about 4.5% appreciation going forward. Which is still higher than the 3.5% historical average.  

When looking at their projections over the next five years, not one of them is expecting a market crash or severe depreciation. Click to read “The Real Estate Market Shift Is Here”.

Lawrence Yun, chief economist at the National Association of Realtors®, presented his 2019 housing and economic forecast this past November. For those that worry we are experiencing an economic bubble, Yun was quick to shut down any such speculation.

“The current market conditions are fundamentally different than what we were experiencing before the recession 10 years ago. Most states are reporting stable or strong market conditions, housing starts are under-producing instead of over-producing and we are seeing historically low foreclosure levels, indicating that people are living within their means and not purchasing homes they cannot afford. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust.” Lawrence Yun, Chief NAR Economist

Nationally, median home prices are expected to rise $266,800 in 2019 to $274,000 in 2020, a 3.1% gain over the next 24 months. The rate in which “Home price appreciation will slow down – the days of easy price gains are coming to an end – but prices will continue to rise.” – L. Yun.

What about the rise of interest rates?

There is no doubt that higher rates have an impact on buyer psychology. For Millennials rates were well under 5%. Understandably, they are are now experiencing some sticker shock. Keep in mind, they are still able to purchase a home at rates far below what their parents were paying.

For those that worry that rising interest rates are an indicator of a market crash. Contrary to what some may believe, interests rates were dropping, not rising,  just before the 2006/07 market crash.  During this time, lenders were encouraged to relax their standards and people who would not have otherwise qualified for mortgages, were suddenly eligible. When the bottom fell out and sudden unemployment hit, many homeowners walked away.

NAR, Freddie Mac and the Mortgage Bankers Assoc. are all saying that home sales will rise in 2019. Going so far as to say that the number of transactions they are predicting will exceed that of 2018. For more on where interest rates are headed, click here.

What’s happening with new construction industry?

Prior to the 2006/07 market crash, new construction had flooded the market. Many home builders were left with hundred of thousands of dollars of unsold inventory and declared bankruptcy.

Although the new construction market began to pick up in the last 18 months, it’s still well below what it needs to be.  According to Freddie Mac, the new construction industry fell short of the number of new build inventory by as much as 2.5 million nationwide.

Are lending standards getting too loose right now? 

There’s plenty of evidence that points to the fact that the lowering of credit standards played a major role in driving the boom & bust of 2007. Each month, the Mortgage Bankers’ Association (MBA) releases a measurement which indicates the availability of mortgage credit known as the Mortgage Credit Availability Index (MCAI). This calculation includes credit score, loan type, loan to value ratio, debt to income ratio and more. Basically, the higher the number, the easier it is to obtain mortgage financing.

During the buildup that lead to the last housing bubble, the MCAI sat at around 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market crashed in 2008, the index fell to just over 100. Today the MCAI sits at 186.7 – indicating a much tighter lending standard than what it was prior to the buildup of last decade and less than one-quarter of where it was during the bubble.

What does this mean for me selling my house?

Keep in mind, the numbers I refer to here in this blog are mostly national, not local. I live and work as a full-time Realtor in Livingston County, Michigan where home demand is still very high. We’ve only just started to see a slight slow down in home appreciation rates coupled with a slow increase in inventory month over month.

As the number the homes for sale continues to slowly rise with resale homes and new builds, the instances of multiple offers will eventually diminish and days on market will start to grow to more normal levels again.

This is still a great time to sell because homes have NOT depreciated and market values are at around 6%. Depending on when you purchased your home and how much equity you’ve built up over the years, now is a great time to leverage your most valuable asset into an upgrade or downsize to a smaller home. Click to read my recent account here.

The sooner you list your home for sale in 2019, the better because you’ll be able to get ahead of the Spring/Summer market influx where competition is always much higher. Serious home buyers are still out in force purchasing during the winter months.

What does this mean for first-time home buyers?

With 2019, comes more inventory which means more to choose from. Home prices are starting to level off now but don’t expect a big drop. More inventory also means homeowners will be more willing to negotiate and there’s a greater chance of securing that perfect first home. It also means less bidding wars you’ll have to engage in. Read “Armed & Ready: 5 Winning Home Buyer Tips”.

Comments & Questions

As always, I invite you to leave your comments below. Do you have any questions? I’m happy to help.

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21 Responses

  1. Andrew G says:

    Thanks a lot for helping me understand women to the crash back then and now seeing forecast that this is not the same scenario all the good happen someday maybe not anytime soon. I will look forward to more follow-ups on these developments. Keep up the accurate and detailed work

    • admin says:

      Andrew. My goal is to dispel a lot of the misinformation out there regarding the real estate market as a whole. I always do what I can to keep my finger on the market pulse so that I am also well informed. Thanks for taking some time to leave your comment.  🙂

  2. Melissa says:

    Thanks for the insight and commentary. Given a home is the most expensive thing that we’ll ever buy in our lifetime, it’s important that we go in armed with knowledge. I’m interested to understand why you think it’s better to list your home in winter rather than summer, and I know you mention that is related to competition, but are there any other reasons? Out of curiosity, is this true everywhere or does it change depending on where the house is for sale? I have an investment property near the beach and had always thought if we were to sell that it would be best to go in the market in summer because people are keen to go to the beach then? Thanks.

    • admin says:

      Hi Melissa, Yes, in addition to the fact that you’ll have less competition to contend with you could sell for more than if you were trying to sell at the same time as hundreds of other homeowners typically do (Spring & Summer). People searching for waterfront property look all year long. Those types of properties are sold at a premium typically. 

      The competition in any industry forces pricing to drop. It’s during the winter months that the serious buyers who have been searching all summer long are eager to finally secure a home. Most seasonal house hunters drop off in the colder months. Offhand, it’s probably not the case for states that don’t have the big seasonal shifts that east coast states have.  That’s just my guess since I’m not familiar with that market.

  3. Sujandar Mahesan says:

    This is a great article. We just bought a new house and it is really awesome to know about 2019s housing market forecasts because we are also thinking of doing remortgage. Thank you for posting 2019 Housing Market Forecasts it is really helpful for me and any real estates and home buyers out there.

  4. Alisha says:

    This is such an interesting article! I have been looking at homes off and on for the past couple years, although I am not decided yet, this helps me determine when the right time would be. It is incredible to hear about the market crashes and how it effected people financially, I was in high school at the time, I remember my parents struggling but I did not have to live financially through it. What is the best approach you’ve found to negotiate with homeowners?

    • admin says:

      Alisha, Thanks so much for your comments. The fact is that today mortgage rates are still very affordable and you can secure a mortgage for considerably less than your grandparents or parents had to pay ten years ago. I remember rates were 18% in 1981, when I was in high school. Take a look at my blog Armed & Ready: 5 Winning Home Buyer Strategies for more tips. I’d love to read your feedback on it and please share. 

  5. Scott Hinkle says:

    Thank you for this excellent and very informative post.  You hear the hype all the time that a crash is coming.  It’s hard to keep from getting swept away with it all around you.  Your post here has helped to correct the misinformation being tossed about.  I do have a question for you.  How does this affect renters?  I have some in-laws that need to find a rental property and we’re just not sure when to strike so to speak.  Do you have any thoughts in that regard?

    Thanks again for helping me to understand what’s really going on.

    • admin says:

      Scott, are your in-laws looking to acquire rental income or are they considering downsizing and renting themselves? Rental rates are still at an all-time high in many areas of the country. I don’t see this changing in the near future. This is great for investors looking for rental income. In fact, there’s a growing trend of homeowners using their current home equity to build their wealthy quickly in real estate. Check out my newest blog, Building Wealth Quickly Through Real Estate.

  6. Christopher says:

    You obviously have some solid research behind your post.

    I live in the Seattle area where for the past few years we’ve seen an unprecedented building boom. Now, I think the bubble is either bursting or the air is escaping quickly. Anyway, things aren’t moving quite so fast.

    I’m happy to say that my wife and I were able to lock into a very low interest rate some years back when we refinanced. 

    I’m glad you’ve mentioned there will be appreciation going forward and that most real estate professionals say there will be no crash.

    Thanks!

    • admin says:

      Christopher, the new construction here in Michigan and many other states, has fallen short. However, I do expect them to catch up in the next 12-24 months. Thank you for your comment. 

  7. Wesley says:

    You have a lot of information pertaining to the housing market I was unaware how the housing market work. I’m looking to buy my first home in a few years so I want to have as much information as possible when considering what type of home to buy and where to buy. Your website offers me much useful information about the housing industry that will be helpful, clear and shows me how much I should save before considering how much I need. Thank you for all your help and your expertise!

    • admin says:

      It’s my pleasure to work with first-time home buyers as well. I’m an open book and will share my own experiences with the public so that they will benefit from it. Thank you for taking some time to comment. Really appreciate it!

  8. Britney says:

    This is great information on the current state of the housing market. I’m not a homeowner yet, but you’ve given me plenty of things to consider when I am able to buy my first home. I never considered that a good time to buy is when inventory is high and homeowners are more willing to negotiate. I just thought you buy whenever you get access to the funds and when your offer is accepted by the seller. But obviously there are so many other factors at play. 

    Thanks for sharing!

    B

  9. charles39 says:

    Home ownership can be Avery tricky scenario   looking at different  angles for example real estate might be selling most of their home at prices above average then we have  agents who are acting like brokers or let me call them middle men who wants a pie of the cake  then lastly but  not the least banks morgage  providers  are not will to give loans to new owners or if they give they taking very high interest to could be home owners  in my humble opinion  i think all this  are factors in the home  ownership   that is why you see  sometime supply is lower than demand or demand is higher than supply.please tell your take on my opinion

    • admin says:

      Charles, I been in the real estate market since 2011 full-time, first as an investor and then also as a Realtor here in Michigan. I work with first time home buyers quite often and I don’t ever hear that they are having trouble qualifying for a mortgage. 

      A sale only happens when you have a ready and willing seller working with an equally ready and willing buyer. That’s true of any industry. When inventory is low, prices go up. When something becomes scarce or in low supply, its value increases.

      I understand that some people like to trash Realtors. However, like in any industry, there are good doctors, dentists, lawyers, carpenters, etc., and there are bad ones. I’ve experienced both sides of this coin. In general, depending on credit score history, rates are hovering around 4.175 – 6%.  Much higher though, 7%-9%, for investors seeking alternative financing from hard money lenders who don’t require tax forms.  

      Realtors work with both buyers and sellers to help them accomplish their goals, follow guidelines, provide factual information so that each client came to make an informed decision. We also work to facilitate the transaction and make sure that all state and federal laws are followed, that a trustworthy title agency is conducting its due diligence and that the interests of their clients are protected.

  10. Sondra M says:

    Annette, as a real estate broker in the Colorado Springs area, I am thrilled to see this article.   Sometimes I think the media thrives on sensationalist or bad news.   

    I work in a very specialized niche – country homes, farms & ranches that are on at least 5 acres.    So, it takes me a bit longer to get my market reports and analysis done since I do a lot of the analysis by hand.   So, I am not ready to share my  December and year end figures yet.    However, I can say that I agree with what you have said.    My observations  can be applied to the Colorado Springs  metro as a whole.    

    Yes, the number of rural homes sales in December were down somewhat.   Yet, this is due in part to the combination of  the seasonal dip, bad weather and the on-going limited inventory in the starter and trade up markets.    

    Our premium and luxury market seems to have shifted from a buyers market to a balanced market in the last few months.   Although the number of homes that sold in December in those markets decreased,  sellers were accepting offers in December.   So, I expect the number of sales in January and February sales to be higher than December.    

    Our lowest priced homes, those under $200,000, which are in a condition that requires a cash buyer appears to have shifted from a buyers market to a more balanced state.   I think that was largely attributable to the seller’s finally accepting the fact that they will not get market value for a home that needs major renovations or to be torn down.  Even then, those properties are still selling for more than they did 3 years ago.    

    Thanks for working to provide some of the facts.    

    • admin says:

      Sondra, Thanks for your comments here. Yes, it appears that we have indeed started to see a leveling of market prices in some markets (i.e. premium and luxury). I’m in Michigan where you can buy a solid move-in ready home for around $200K. I’m assuming that homes are more expensive in Denver since you stated homes in that price range are generally considered “fixer-uppers”.  I certainly appreciate your input from a fellow Realtor. Thank you!

  11. Abagatan says:

    Thanks for this information on what is happening in your own location. I think this trend is all over the earth for we in the Philippines is not exempted. A home is a need and it should be available and affordable to the populace.

    Because of the rise of industrial land conversion prices are shooting-up even in rural areas. Price controls should be in the government and not on the capitalists that manipulate the lives of people.

  12. Alane says:

    Very informative article and easy for a lay person to understand.👍🏻 The graphics are helpful and well placed. As are the videos.

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