Happy New Year! Whether you’re thinking of buying, selling, or are just curious about your home’s value, you may be wondering what’s in store for the housing market in 2019. Will the healthy national housing market continue or will an increase in interest rates throw a wrench in the works? Will houses continue to fly off the market? How will the new tax code impact housing? This post addresses these questions and more.
Although it’s impossible to predict the future, current trends and statistics create a picture of the market’s health. Lawrence Yun, the Chief Economist for NAR (National Association of Realtors) predicts a very stable and steady 2019 real estate market on the national level. Portland will also see a similar trend. The average appreciation in 2018 was 5.5% and the inventory finished the year at 2.5 months. We expect to see similar appreciation in 2019 with some neighborhoods trending above and below this number. We have seen highest appreciation in Gresham and outer areas where the median home price is less.
Below are more statistics about the national housing market:
Home prices are up 4.6% and the average home value is $264,800. Sales may be down, but prices will continue to rise. This is good news for sellers, but may keep buyers on the sidelines in high-price markets.
Homes are selling fast. Homes are on the market for an average of only 29 days, with 52% of homes on the market for less than a month.
Inventory is tight. People are staying in their homes longer and housing starts are at an all-time low. However, housing permits are up 8.4% over last year, which means more inventory to come.
Home sales are down 1.4% from a year ago. Experts say that many buyers are priced out of the market or they’re waiting until more homes within their price range are available.
Competition is high. First-time buyers made up 31% of home purchasers. For those in the market to buy, get pre-approved for a mortgage to stay competitive. If you need a lender, I can refer you to a great one in my network.
New tax code may have an impact. The interest deduction is capped at $750,000 (down from $1 million) and the property tax deduction is capped at $10,000. This may mean less expendable cash for those with, or needing, a big mortgage.
THREE THINGS TO WATCH FOR IN 2019:
- Interest rates. Experts predict the Federal Reserve will increase interest rates two times in 2019. However, increases are expected to be gradual. Right now rates have dropped to 4.5%!
- Inflation. Inflation is expected to increase slightly in 2019, due in part to a strengthening labor market and tariffs.
- Strength of economy. The economy continues to grow and strengthen, a trend that is expected to endure in 2019.
Will We See a Market Correction?
Recently, you may have seen news headlines predicting the next recession. The economy has been growing since 2009, the longest stretch in US history. Since the economy is cyclical, it’s only natural to wonder when the economy will begin to retract.
Causes of a downturn. Recessions are often caused by unforeseen events or circumstances that shock the market. 62% of experts say an overheating economy will lead to the Fed tightening its belt. Others say a financial meltdown may be caused by an asset bubble, fiscal crisis or international trade disruptions.
Reason to be optimistic. Housing isn’t likely to play a large role in the next recession. Although affordability remains a concern in many areas of the country, experts say that housing is unlikely to cause another recession.
Take headlines with a grain of salt. Experts predicted recessions in 2011 and 2016, and neither transpired. It is important to remember that growth doesn’t last, so a downturn would be considered natural. Over the next year, economists predict the Gross Domestic Product (GDP) will continue to grow and unemployment rates will fall further. The risk of recession in the next year is only about 15%, and the changes to the tax code effective this year are expected to drive business investment spending.
We look forward to helping more of your family and friends and maybe YOU this year. Regardless of the state of the market, we always say that the best time to buy or sell a home is when you’re ready to do so. If you’re considering it, give us a call! Even if you’re not in the market now, give us a call to find out how much your home is worth today and tips on how to add value to it in the years to come.