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January 10, 2019

What’s in Store for the U.S. Housing Market in 2019?

The American housing market has seen tremendous gains over the last six or seven years. Property values in desirable areas of the country have climbed to all-time highs.

But what does 2019 have in store? Will we enjoy more of the same bullish growth … or is a crash imminent? Experts aren’t sure what to expect, not surprisingly, but they’re never shy about offer their opinions.

Four Thoughts and Predictions for 2019

Whether you’re a renter, homeowner, investor, or real-estate professional, 2019 is promising to be an exciting and busy year. Whether the excitement will lead to positive gains or scarring losses remains to be seen, but here are a few thoughts and predictions to chew on.

  1. Interest Rates Will Continue to Rise

Interest rates have been at near record lows over the past few years, but they’ve slowly inched upward in recent months. All signs indicate they will continue to rise in 2019.

Unfortunately, that could signal an impending recession that could hit in the near future. “Some experts believe the US Fed launches recessions with unreasonable rate increases,” mortgage expert Gord Collins writes.

“In fact, every recession or major catastrophe has been aided by fast rising interest rates. These rate spikes kill off business and put extreme pressures on mortgage holders. Markets crash quickly then interest rates are quickly lowered.”

Rising interest rates don’t necessarily mean a crash is imminent in the new year, but they’re definitely a factor to watch carefully as we move forward.

  1. College Town Real Estate Increases

College towns — or the portions of metropolitan regions that are located near university campuses — tend to be anomalies in the real estate industry. They command prices that far outreach what their realistic value would be anywhere else, simply because there’s a captive audience and a sharply limited supply of housing.

In 2019, major college towns like Chapel Hill, North Carolina, will likely continue to see prices rise. Apartments that adopt a luxury brand position such as Chapel Hill North Apartments — will undoubtedly thrive.

  1. Housing Affordability Holds Steady

Due to news coverage of markets like San Francisco, Dallas, Chicago, and New York, the general public tends to believe that housing in general has become unaffordable. This drives many potential buyers to stay out of the market.

But this is a bit of a misconception. “NAR research shows that a lower percentage of consumers think that now is a good time to buy, while more are indicating that it is a good time to sell,” says Lawrence Yun, chief economist at the National Association of Realtors.

“Problems could arise if the market is flooded with too many sellers and not enough buyers. Fortunately, that does not appear to be the case, as indicated by months’ supply of inventory at below five months.”

Because of the common perception, however, housing affordability will more likely hold fairly steady. It’ll be interesting to see what sort of impact (if any) this has on potential buyers who have remained outside the arena.

  1. Foreclosures on the Rise

Foreclosures flooded the market during the most recent recession, as borrowers struggled to satisfy their mortgage requirements in the midst of plunging home prices and record unemployment. Over the past five to seven years, borrowers have been in better shape — aided by low unemployment and low interest rates.

But there are signs the US market could be reversing course. “The housing analytics firm Attom Data Solutions found that foreclosure starts are increasing again for the first time since 2015,CNN reports.

The trend is particularly visible in hurricane-hit cities like Houston, but also increasingly expensive places like Los Angeles.

Its not quite time to panic, but it looks as if we may be experiencing shift in direction. Real estate experts will be tracking this attentively throughout the year.

Hold On Tight

Although nobody knows for certain what will happen in the real estate market in 2019, predictions from various experts largely agree the market will experience both up and down runs. There will be times where it may appear the bottom is about to fall out, as well as periods of heartening growth.

At the end of the year, well most likely be sitting in a fairly similar position to where we are right now. For the average homeowner, its may be smartest to hang on and wait to see what happens before making any significant decisions.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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