Housing Forecast

Investors Circle: 2019 Market Forecast For Investors

In the past, the housing market has been crippled with a shortage of houses and rising cost especially in major cities like New York, San Francisco, Phoenix, Seattle, and Miami.  It was said that there was such a huge shortage that we will come to a point where we will have an outright bidding war.  However in the summer of 2018, this was somewhat of the opposite.  Things pretty much cool down and wages have risen much slower than home prices.  The housing market follows the old economic principle of price being a function of supply and demand, and demand is strong with the economy doing well and older millennials finally entering stages of life that lead to buying a home.

With this kind of factors happening last year, what can we expect in 2019 for real estate investors?  Sure we know that investors are correlated to what consumers are doing.  After years of steady growth and low interest rates, many observers anticipate a correction, especially in the face of new technology, generational and demographic changes, the rise of new markets, and the continued winding-down of traditional retail.  This year there will be new factors that may create challenges for investors. Shrinking affordability will convince some buyers, especially first-timers  to sit out the market altogether this year because they can’t make the numbers work. Homeowners considering selling their home may also stay put because of rising mortgage rates a so-called interest rate trap. Most outstanding mortgages have an interest rate of 4.5 percent or less, according to a report this year from Black Knight, a data analytics firm.    

Investors have long seen urban revitalization in smaller U.S. cities as a great bet, but as these downtowns boom and millennials continue to return, young adults have started to make inroads into the suburbs. Researchers are seeing more evidence the younger generation that put off buying a home has its eyes on single-family homes, meaning that housing surrounding these so-called 18-hour cities especially if it’s in walkable, transit-oriented developments is in high demand.

Historically, the complete real estate market cycle has had an average duration of about 18 years, and the current one just marked 10 years recently.  Moreover, compared to the two previous real estate cycles, the current one has been very mild in magnitude, with historically low annual returns in its expansion phase.

All in all, housing is set for a slow-down this year, but as Kapfidze explained, that’s not necessarily a bad thing “The medium and long-term prospects for housing are good because demographics are going to continue to support demand,” he said. “With a slower price appreciation, incomes have an opportunity to catch up. With slower sales, inventory has an opportunity to normalize. A slowdown in 2019 creates a healthier housing market going forward.”


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