2019 HOUSING PREDICTIONS

Mortgage affordability takes a hit:

Despite steady climbing for the past two years, mortgage rates remain lower than they were during most of the recession and below average for the type of strong economic growth we’ve been experiencing. That will change in 2019, as the 30-year, fixed rate mortgage reaches 5.8 percent – territory not seen since the dark days of 2008, when rates were racing downward in response to the housing crisis. In 2019, rising rates will compound the effect of still-climbing home values, making homeownership even less affordable. Already, rising mortgage payments eclipse home-value gains, a phenomenon that can both encourage homeowners to stay put – to hold onto low mortgage rates that are disappearing in the rear-view mirror – and discourage would-be first-time home buyers.

Rents reverse course:

Although rising mortgage rates will affect home buyers first, renters will not be far behind. As higher rates limit the number of homes that potential buyers can afford, some would-be buyers will be too financially stretched to buy and will continue renting. As a result, recent (and very slight) drops in rent will reverse and turn positive again. The shift will be muted, however, by continued steady investment in apartment construction, which will prevent rent growth from shooting too far above income growth. In the third quarter 2018, the U.S. median rent cost 28.2 percent of the U.S. median income – considerably higher than the 25.8 percent renters paid historically​

Home value growth slows:

One mitigating effect to rising mortgage rates will be slower home value growth. In October, home values were up 7.7 percent from a year earlier, to a U.S. median of $221,500. Zillow forecasts growth of 6.4 percent from October 2018 to October 2019; a Zillow survey of housing experts and economists anticipates a 3.79 percent increase for calendar 2019. Both forecasts indicate cooling from red-hot growth of 8 percent in March of this year.​

Appreciation:
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According to CoreLogic's Chief Economist noted that price increases have been moderating.  "Higher mortgage rates slowed home sales and price growth during the second half of 2018. Annual price growth peaked in March and averaged 6.4 percent during the first six months of the year. In the second half of 2018, growth moderated to 5.2 percent. For 2019, we are forecasting an average annual price growth of 3.4 percent."

The CoreLogic HPI Forecast is for appreciation of 4.6 percent from December 2018 to December 2019, but a decline of 1.0 percent from December 2018 to January 2019.  Comparing the annual average HPI and HPI forecasts for 2018 and 2019, the company says annual price growth will slow from 5.8 to 3.4 percent. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

Sources:

CoreLogic.com
​Zillow.com