With the political atmosphere heating up and 2019 on its way, many home buyers and home sellers are wondering: Is it going to be a seller’s or buyer’s market 2019?
The 2018 real estate market has seen its shares of ups and downs, with seller’s markets reining supreme in many of the coastal states, at a dramatic pause in some places (Los Angeles comes to mind), and rising interest rates adding a nice spin on it all.
Before we launch into forecasting the market, let’s take a step back for those who are new to buyer’s and seller’s markets.
What is a buyer’s market?
A buyer’s market happens when housing inventory is higher than the number of people looking to buy a house. Supply and demand dictate that when supply is higher than demand, prices decline; that’s exactly what happens with the housing market during a buyer’s market.
Demand for homes goes down and so do prices—making it a great time to purchase a house. If you need an example, refer to the housing market in 2010.
Some signs that tell you it is (or will be) a buyer’s market:
- Home construction will be on the rise even as the demand for homes begins to decline
- Home prices begin to flatten
- The economy begins to stabilize (or even decline a bit)
- The stock market levels out or becomes a bit rocky, settling inflation
What is a seller’s market?
A seller’s market occurs when the demand for homes far outweighs the supply. The strong demand for real estate makes homes for sale increase in price as those looking to buy homes enter into bidding wars with other potential buyers.
Some signs that tell you it is (or will be) a seller’s market are:
- Homes are selling for high prices, even in “as-is” condition
- Sales-to-active listings ratio is above 12%
- The economy is on the rise
Market Forecast 2019
If predicting the market was an exact science, we probably wouldn’t have had the stock market crash of 2009. That being said, experts (like those from Freddie Mac, Zillow, Pulsenomics, and other organizations that run surveys and large quantities of data) take numbers like the average rate of houses on the market and compare it to the year over year data they’ve accumulated. They use all of this data to predict home prices and the housing market as a whole.
Have they ever been wrong? Absolutely.
This data we are about to show you—while backed up with market averages and supply and demand rates of past years—does have conflicting data that proves the exact opposite.
But the sources of this data have also known to be spot on.
So, while forecasting the real estate market does smell a bit like fortune telling, here is the real estate market forecast for 2019.
Will it be a seller’s or buyer’s market in 2019?
Real estate website Zillow and research firm Pulsenomics recently conducted a survey of over 100 real estate economists and experts.
From that research, they believe the US housing market will become a buyer’s market in 2020.
In fact, according to the Zillow Home Price Expectations Survey, house prices that have been on the rise for the last four years were prediced to slow to 3% appreciation by October 2018. This slow in the market, experts believe, is a sign that there is a significant impending shift in the market.
Zillow isn’t the only one conducting research on the real estate market, however. The fall 2017 edition of The Housing and Mortgage Review released by Arch Mortgage Insurance Company squashes those expert predictions by declaring that there is little chance of a housing bubble.
In fact, their data shows the chance of home prices dropping over the next two years (at least in over 400 of the nations largest cities) at an average of only 4%.
That survey did indicate larger dropping averages in some states, such as Alaska (39% chance of a drop in home price), North Dakota (33% chance of a drop in home price), Wyoming (31% chance of a drop in home price), and more.
A Shift in the 2019 Market
Despite the somewhat conflicting data, one thing is certain: the market is shifting.
We know this because the prices for existing homes only climbed 6.4% in May 2018, which is the smallest gain on a year-over-year basis since 2017. According to the Federal Housing Finance Agency, this is the smallest gain over three months since 2012.
While there are many contributing factors to the decline, one factor stands apart in the housing market: rising interest rates.
In 2017, the average rate for your typical 30-year fixed mortgage was a bit below 4%. As 2018 begun, the interest rates began to climb until they reached 4.52% in July of 2018.
Why is this happening?
After the market crash of 2008, the federal government took over and decided to artificially keep the mortgage interest rates low. This helped stimulate the market and allowed many who had been affected by the crash to get houses. Now that the market has become more healthy, the time for artificially keeping the interest rates low has passed.
The Federal government announced in the middle of 2018 that they plan to increase interest rates.
Economists from Freddie Mac and the Mortgage Banker’s Association predict that interest rates will rise to 4.9% by the end of 2018, and continue to rise throughout 2019.
The Market for Buyers and Sellers in 2019
Rising interest rates make it difficult to sustain a seller’s market—especially in cities with houses hitting astronomical prices, like Los Angeles. In cities like that, you are seeing people pack up and move to more affordable locations—like Idaho and Arizona.
If you’re planning on selling your house soon, now’s your moment. The decline hasn’t completely taken hold and prices are still high enough to make a profit.
If you’re planning on buying a house, now is also the time. Unfortunately, with rising interest rates, even if the price of houses even out into more of a buyer’s market, you’ll still be paying about the same when you factor interest in.
Now is also the time to buy into a real estate investment if you have cash. As prices begin their decent and interest rates climb, you can snatch homes for a great deal without the hassle of taking out a loan with a hefty interest rate.
Even if you are just able to put down a large down payment on your house—anything you can do to lower the interest rate is a smart move if you are planning on buying soon.
Although the forecast may not be something you want to hear, the good news is many people don’t believe a crash is coming—unless President Trump loses the 2020 election. President Trump (love him or hate him) has done a lot to boost up the U.S. economy—at least in the short-term. Many predict his fall will bring the crash that many economists have been prophesying about.
Real Estate Investment in 2019
So how do you remain safe during a crash like the one that began in 2007? Invest in real estate.
Your 401k and other types of stocks have the capability to hit a big fat zero in a market crash—real estate cannot.
Many people are diversifying their investments into real estate, gold, and silver, as all three of those always have a tangible value on the market. They may decline a bit, but they have the propensity to rise time after time, making them a wise investment in the long run.
Not sure where to get started with your real estate investment? Go here.
The mid-US has been a favorite among investors for a while because of the cheap house prices and steady rent. With predictions in the wind about the market shifting, some experts predict the mid-US will see a change as well. The bottom line: buy while you can.
Whether you are gunning for a buyer’s market or hoping to sell before the seller’s market runs out, it looks like your time to do either is now.
Many who have been playing the real estate game for a while talking about how much they like the real estate market—that unlike the stock market, you can see the shifts and make decisions before you lose a lot of money. Many of those experts are saying that change is happening now.
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