What to Expect in 2019 Real Estate

By Emily McCrary-Ruiz-Espara
Photo by Bernadette Gatsby

Last year began as the year of high home prices, low mortgage rates, and closed out on the opposite end of the spectrum. In 2018, real estate prices hit an all-time high mid-year, and American wage growth slowed. At the same time, it was estimated that nearly half of US housing markets were overvalued.

The upcoming year is expected to bring relative relief to consumers: “2018 is looked at as one of the most competitive home-buying markets in history,” says Kathy Cummings, SVP of homeownership solutions and affordable housing programs at Bank of America. “So as a contrast, in 2019 consumers will feel some relief. Inventory shows signs of rising and diversifying with prices reaching the lowest seen since 2014.”

Here’s what you can expect in 2019 residential real estate.

Mortgage rates will likely continue to rise, but at a slower rate

The Fed raised mortgage rates in December, and it’s expected to do so again in 2019, though at a slower rate than in 2018. It was general consensus that last year was a seller’s market, and 2019 will likely be in sellers’ favor as well. Housing inventory will increase but will not meet demand, which will drop prices, but not significantly. And with wage growth still sluggish and rent prices on the rise, many may find it tough to save for a down payment.

In terms of who’s entering the market and who controls, 2019 will largely maintain the status quo.

Millennials will continue to make up a large segment of homebuyers

Millennials made up the largest share of homebuyers in 2018, according to the National Association of Realtors, and in 2019 this demographic will continue to lead in home purchases.

“Millennials continue to make up a large segment of buyers,” says Dolly Hertz, licensed real estate broker with Engel & Voelkers NYC. “And they are very tech-savvy, well-informed, and demanding. It’s still a tough buy for first-timers, though, as the bulk of inventory overload is not at entry level.”

For real estate agents and mortgage lenders, this means that all those think pieces on the Millennial as homebuyer will be put to the test in full force in real estate marketing efforts. New real estate and personal finance products will continue to be increasingly digital.

This year we expect to see consumers fully embracing technology in the homebuying process,” Cummings says. “Many parts of the journey can now be done digitally, from the house search to the mortgage application. The Homebuyer Insights Report (HBIR) found that 32% of Americans are comfortable applying for a mortgage digitally and we anticipate this number will continue to grow.”

First-time buyers will be priced out of what excess inventory exists

As Hertz pointed out, though we will see housing inventory increase in the coming year, what excess does exist will be a result of many in-market buyers being priced out, especially first-time buyers—a product of slow wage growth, high student loan debt, and rising rent prices.

Sellers will begin to lose their overall advantage

Though many first-time buyers will be priced out of excess inventory, supply will begin to catch up with demand in 2019. As Cummings points out, “Sellers will be at a slight disadvantage compared to their footing in the past year. With more homes on the market and inventory levels sustained, they’ll need to reel in their expectations when it comes to asking price.”

While we can’t expect the market to completely flip in favor of buyers, sellers should not expect the same heated bidding wars or the ability to crank up prices in key buying seasons.

The government shutdown may threaten consumer trust

As of the publication of this article the United States is in the midst of the longest partial federal government shutdown in history. Nearly one million federal government employees have been furloughed, many are being called back to work with no assurance of when they will receive pay, and it’s unlikely government contractors will receive any back pay at all. With workers going without pay for more than four weeks now, the economic effects could be far reaching.

Jeremy Browne, vice president at TTR Sotheby’s International Realty weighs in:

“If the shutdown were to end today, I believe we would see minimal effects to the housing market. FHA and VA (government backed) loans are still being processed, but possibly being delayed. With everyone back to work, things would snap back to normal quickly.”

But should the partial government shutdown continue, Browne believes that the repercussions could reach the housing market.

“There is a lot of speculation on this, and I feel the main issue here is consumer confidence,” Browne says. “Uncertainty causes disruptions to markets and homebuyers are included. They start to take a cautious approach and think that maybe now isn’t the best time to make one of the largest purchases of their life. I have had two clients take a step back for at least three months until they feel comfortable again.”

He continues: “On the bright side, the majority of homebuyers use conventional loan products, which are not backed by the federal government, but are instead facilitated by private companies like Fannie Mae and Freddie Mac. While these companies are government-sponsored enterprises, they aren’t directly affected by the shutdown. The best thing to do is to talk to a local lender and have any questions specific to your situation answered. Misconceptions or assumptions shouldn’t stop you from moving forward.”

The 18-hour city will continue to rise in popularity

American workers with high-earning jobs are finding themselves priced out of gateway cities like San Francisco, New York, and Los Angeles, giving rise to growth of 18-hour, or secondary, cities like Houston, Raleigh, Phoenix, and Philadelphia. Cities like Seattle and Austin, who were among the first “wave” of secondary city growth, are arguably edging into the primary city halo as cost of living blooms.

These 18-hour cities offer in-demand amenities like public transportation, walkable neighborhoods with a residential and commercial mix, local restaurants, and cultural centers, combined with lower cost of living and plenty of jobs—facilitating the live, work, play trifecta. And it’s not just Millennials who are opting for secondary cities, Boomers are feeling the draw as well.

Matt Guy, managing principal broker for Living Room Realty in Portland, Oregon: “In markets like Portland, there will still be high demand and multiple offers for very desirable areas and competitively priced homes, characteristics of the hotter markets of the previous years. We expect to see continued migration from more expensive areas like California to places such as Portland which are perceived more affordable.”

The apartment building amenities race will continue

Pools and gyms will hardly cut it in markets where landlords are entrenched in an “amenities arms race.” Renters in cities like Chicago, Philadelphia, and New York will find themselves being wooed on all sides by landlords offering everything from artist-in-residence programs and private pool cabanas to indoor dog runs and apartments outfitted with smart home technology—and both buyers and renters will reap the benefits.

“Fancy gyms and rooftop gardens no longer meet buyers’ (or renters’) expectations,” says Hertz “Frequently requested new amenities include: coffee shops on the property, Amazon lockers, USB charging outlets in unit, and thermostats or door locks controlled by apps.”

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