It can be helpful to know what you’re getting into if you’re thinking of renting, or buying or selling a home, come 2019. Currently, there’s a trend of a shortage of homes compared to all the buyers, and rising interest rates are causing many people to pause on making deals. This is what you can expect this year from the housing market.
A big topic for buyers is how rates of interest are currently rising. Mortgage rates are at their highest since 2011, and while high rates typically indicate a strong economy, this change has made many people hesitate about entering the housing market. Rates of interest were raised three times by the Federal Reserve in 2018, with plans to hike them up again several times come 2019.
You’ll see the impact of these raised rates in the payments you make monthly, and this is where there can be up to several hundred dollars’ difference. Given this, some potential buyers are taking a step back, which slows the increase of prices of homes and lengthens the time that houses are listed, as people are afraid of being unable to make payments.
As the number of buyers declines, the prices of homes will likely slow across the country. Prices have also outpaced the growth of wages, which means that the housing market may slow, and possibly go flat, in some areas. If markets do grow, they don’t do so quickly. For homesellers, the biggest source of hesitation is that selling means they’ll also be buying a house, which leads to a new mortgage and rate of interest that is more current (hence higher) than what they are used to paying. It’s expected that the market will see low inventory as both sellers and buyers adjust to the current rates of interest.
There are also many alternatives available to sellers, so they don’t necessarily have to put their house on the market. Investment companies such as Express Houston Home Buyer conduct quick purchases in the form of a cash offer on your house, then rebuild and resell, and companies like Opendoor allow people to directly sell their own house. While these platforms won’t necessarily get rid of the traditional process, it’s very popular and growing. In a market where there’s less demand, sellers might see that selling their home to a company, rather than a buyer, can be faster and easier.
Many people who would buy homes, but are hesitant about prices and rates, easily stay with renting. In a sense, this will please landlords, who won’t worry about vacancy or decreased demand. However, renters are the ones who benefit if there isn’t a lot of rental demand. An increase rates of homeownership are also good news to renters, as they won’t have to compete with many other renters and can gain a lot of power in bargaining for rent or amenities. The current state of low rates of unemployment and increase in wages also benefit renters. Affordability has increased for rentals, especially since the recession. It’s a good time to be a renter, however, renters should keep in mind that this is a good period of time to save as much money as they possibly can, since jobs are strong and wages are up, to prepare for the time when affordability may decline again.