Inventory increase, easing prices will let buyers into the market
A cooling US housing market but one that will help increase the homeownership rate are among the predictions for 2019 made by Redfin.
"We predict that the housing market will continue to cool into the first half of 2019," said Redfin chief economist Daryl Fairweather, who authored the report. "Inventory will rise back up to 2017 levels, and price growth, while likely still positive, will be the lowest we've seen since 2014 or possibly even 2011.”
The cooling market will dissuade investors and home flippers, allowing inventory to rise; good news for first-time buyers especially with price rises easing to around 3% in the first half of 2019 from the 7% seen in the same period of 2018. Prices may even slip below 2018 levels.
Sales may or may not rise as rising mortgage rates could offset the stronger economy and access to credit.
The homeownership rate, which rose above 64% this year from its 2016 post-recession low of 63%, could see a sharper rise in 2019.
Lenders to expand customer base
With mortgage rates set to hit 5.5% by the end of 2019, Redfin predicts that lenders will feel the effects from increased costs of lending and dampened demand for their services.
They will be motivated to expand their customer base to low-income borrowers and first-time homebuyers. But of course, lenders will charge more for these loans - both to cover the risk of lending to borrowers with less-than-perfect credit and to cover their own costs of borrowing.
Builders to focus on starter homes
There’s more good news predicted for first-time buyers too with builders focusing more on starter homes, although overall starts are set to fall.
Redfin is also predicting a test for institutional homebuying, including itself following the launch of RedfinNow. It says that if i-buying works in a bear market as well as it has in a bull market, instant offers could become a major, permanent sector within the real estate economy. If it doesn't, a lot of money is going to sink into the sand.
It also believes that government will need to enable the building of more homes in tech hubs to avoid the affordability issues seen in established centers such as Seattle and the Silicon Valley.
