December 18th, 2018 6:26 AM by Jackie A. Graves
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As we hurtle toward
2019, economic uncertainty looms ahead as investors keep a wary eye on trade
tensions and wild stock market swings. One key economic driver that’s
increasingly difficult to peg is the housing market.
Softer activity in
2018 has set the stage for smaller gains in home prices and mortgage
rates in the new year, but make no mistake: both are expected
to go up. The question in the minds of homeowners and homebuyers: How much will
they go up?
Here’s a snapshot of
expert predictions for what consumers will see in mortgage rates and housing
activity in 2019.
Mortgage rates will go up (again)
Mortgage rates can be
difficult to pin down with precision, but experts agree on one thing: Rates
will stay north of 5 percent throughout 2019.
Bankers Association forecasts the average 30-year fixed mortgage will hold at
5.1 percent for most of the year. As a result, mortgage origination volume will
stay flat compared with 2018 at roughly $1.63 trillion, says Mike Fratantoni,
MBA’s chief economist.
“Home price appreciation
will slow down — days of easy price gains are coming to an end — but prices
will continue to rise,” says Lawrence Yun, NAR’s chief economist.
Lack of housing
inventory, especially for entry-level homes, has been a thorn in buyers’ sides
throughout most of the country. The situation isn’t expected to get much better
in the coming year.
construction is the special sauce that’s missing from the equation to bring the
housing market back to a more balanced footing. Builders simply aren’t
producing the amount of new homes needed to offset existing-home inventory
predicts average total housing starts will increase to 1.3 million units in
2019, up nearly 3.5 percent from 1.26 million in 2018. Meanwhile, Realtor.com
predicts housing starts will be up 8 percent year over year in 2019.
shortages and tariffs on costly building materials, builders have been unable
to keep up with buyer demand so they’re building more high-end homes to stay
profitable. And that’s a problem for a majority of buyers who are looking for
more affordable homes, says Sam Khater, Freddie Mac’s chief economist.
sales are to resume growth in 2019, builders may have to shift their focus to
more modestly priced homes and smaller-sized homes to help offset housing
affordability concerns,” Khater says. “But with cost pressures pinching
profitability, this will be a significant challenge.”
indications are that we have a housing shortage,” Yun says. “If you look at
population growth and job growth, it is clear that we are not producing enough
What it means
for you: Buying new is a good alternative if existing homes on the market don’t
measure up to your wish list. You’ll likely pay a bit more to buy new, and the
process typically takes longer and has more wrinkles than buying an older home.
You’ll also want to avoid making costly mistakes, such as adding pricey
upgrades, failing to shop lenders, and not budgeting for items you’re
responsible for paying.
and home prices have been a drag on home sales for much of the year. It’s
important, however, to put everything into context. Despite what the market
does, your reason to buy a home — or sell one — is highly personal. Changes in
market conditions may mean you have to rethink how much house you can afford,
but the need for housing will always be there.
Tend to your
financial house to position yourself for success when it’s time to buy. The
conventional wisdom of saving up for a down payment as early as possible,
improving your credit, paying down debt, and sticking to a conservative
home-buying budget still apply. Working closely with a skilled real estate agent and mortgage lender will help you understand
local market conditions, your limitations and the opportunities.
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