What Housing Experts Foresee in 2019

Written By: Joel Palmer, Op-Ed Writer

What can mortgage processors and underwriters expect in 2019?

According to housing experts, overall home sales should increase next year, but there are areas of concern.

Freddie Mac Chief Economist Sam Khater said home sales should “modestly increase” in 2019, provided that economic growth remains stable and mortgage rates stay below 5.25 percent.

“We expect both of those conditions to occur, which should support a modest rise in home sales. The latest monthly data indicate sales are stabilizing as existing home sales have risen the last two months, which is notable given that they had declined for most of 2018.”

Lawrence Yun, chief economist for the National Association of Realtors, also pointed out positive longer-term prospects for home sales. “Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000. But given the 17 million more jobs now compared to the turn of the century, home sales are clearly underperforming today. That also means there is steady longer-term growth potential.”

As with many industry watchers, Fannie Mae Chief Economist Doug Duncan sees an increase in purchase mortgage originations. However, a significant decline in refinances means total origination volume will decline in 2019.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” said Duncan.

On the other hand, Trulia released results of a survey that indicated that home buying activity will slow in 2019 due to worsening affordability.

“Over the past several years, home price growth has largely outpaced income growth, making for an increasingly unaffordable home-buying environment,” Trulia said in its 2019 Housing Market Outlook. “And next year, even as growth in home prices cools, limited supply will continue to help push prices up to some degree.”

The report noted that rising mortgage rates will also negatively impact affordability, along with the already high-priced market.

Trulia said according to its survey, 53 percent of renters say that saving enough for a downpayment is the biggest obstacle to homeownership. Another 36 percent cited rising home prices.

Khater, however, said monthly mortgage payments remain affordable for most buyers.

“First-time buyers account for over 45 percent of purchases and their share hardly has been impacted by the run up in mortgage rates in 2018, which I think illustrates that they are a stabilizing force to the market because their willingness to purchase is high,” he said.

One area where experts typically agree is that the problem of housing inventory will continue in 2019.

“The main reasons for the housing supply shortage are lack of land, lack of construction labor and expensive lumber,” said Khater. “The lack of labor and expensive lumber is cyclical. On the other hand, zoning is a structural issue that is causing the price of developed land to rise and is often an impediment to creating more supply.”

The Trulia outlook noted that even if inventory increases in 2019, it will take a considerable amount of time to be sufficient.

“We do not expect much if any growth in new construction starts in 2019 to help alleviate inventory woes,” said the report.

Yun stated that the latest government shutdown could harm the housing market. That’s because flood insurance will be unavailable until the shutdown ends.

“That means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas,” Yun said. “The longer the shutdown means fewer homes sold and slower economic growth.”

About the Author

As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.