Housing market will be slower, steadier in 2019

Source: Housing market will be slower, steadier in 2019

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NEW YORK – Jan. 4, 2018 – Forget fevered bidding wars and snap home-buying decisions. Slower and steadier will characterize next year’s housing market.

That follows a 2018 that started off hot but softened into the fall as buyers – put off by high prices and few choices – sat out rather than paid up.

Affordability issues will remain a top concern going into 2019, exacerbated by rising mortgage rates. But some of 2018’s more intractable issues will begin to loosen up. The volume of for-sale homes is expected to rise and diversify, while the number of buyers is forecast to shrink.

“For home sellers, they need to recognize those days of frenzied market are over. They must price competitively to sell their home,” said Lawrence Yun, the chief economist at the National Association of Realtors. “For buyers, there will be challenges when it comes to rising interest rates, but they don’t have to make hurried decisions anymore.”

Still, some cash-strapped first-time buyers will simply be priced out, while a cohort of potential move-up buyers will decide to stay in their existing home, make renovations and enjoy their current low mortgage rate. Price increases will moderate, and everyone in the market will need to adjust.

Finally, more homes to choose from

One of the biggest complaints among buyers in the last several years is that there weren’t enough homes for sale. In fact, the supply of houses hit historic lows in the winter of 2017 and has yet to rebound substantially. That fueled bidding wars, price increases and frustration.

The supply crunch is expected to ease some in 2019 with inventory rising 10 percent to 15 percent, according to Yun.

But the increase will be skewed toward the mid-to-high end of the market – houses priced $250,000 and higher – especially when it comes to newly built houses, said Danielle Hale, chief economist of realtor.com. That’s good news for move-up buyers, but not so much for the first-time millennial buyer. “There’s still a mismatch on the entry-level side,” she said.

Houses in all shapes and sizes

If you’re a first-time buyer, you won’t be completely out of luck if you stay open-minded. If a single-family home is out of the question, consider a mobile home or townhouse as a starter home, both of which are on the rise.

The volume of shipments for manufactured houses – also known as mobile homes – is expected to finish above 100,000 this year, up from 93,000 in 2017, according to Robert Dietz, chief economist of the National Association of Home Builders. The trend is expected to continue next year.

These homes are also significantly cheaper than other home types. Not including land costs, the cost to buy a mobile home averages $70,600, compared with $257,900 for an existing single-family home and $309,700 for a new home.

You may also consider a townhouse, an attached single-family home located in a community of homes. Construction of townhomes also is experiencing year-over-year growth and is outpacing the single-family detached home market, Dietz said.

“The market is being supported by millennials moving from renting to their first-home purchase,” he said. “If you’re in a high-cost area with wage and job growth, townhouses are appropriate for entry-level. And they still get that suburban feel with their own front door.”

Affording a home remains hard

Housing values are still expected to increase next year, but not at the gang-buster pace seen in recent years. NAR’s Yun forecasts modest price growth between 2 percent and 3 percent, down from close to 5 percent this year and over 5 percent in 2017.

At the same time, mortgage rates are expected to hit 5.5percent by the end of 2019. Both factors make it more expensive for buyers to purchase a home. Hale estimates that the expected increase in prices and interest rates translates to an 8percent rise in the average monthly mortgage payment.

Interest rate trap

Shrinking affordability will convince some buyers – especially first-timers – to sit out the market altogether next 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.

“They have a nice low mortgage rate, lower than the current rate, so there’s no reason to move,” said Mark Fleming, chief economist of First American Financial Corp.

Tax worries linger

The first few months of 2019 will reveal how the new tax changes affect homeowners. One key rule is the new cap on the mortgage interest deduction.

Before, homeowners could deduct interest they paid on up to $1 million in mortgage debt – including interest on home equity loans and lines of credit – reducing their taxable income.

Now, you can only deduct interest on up to $750,000 in mortgage debt. Interest paid on home equity loans and lines of credit is deductible only if the funds were used to pay for home improvements or renovations.

The only taxpayers who will exceed those limits are high-end homeowners and buyers and those with multiple homes with mortgages.

The bigger question mark is if and how the $10,000 limit on state and local taxes deduction – known as SALT – will affect housing markets in high-tax states such as New Jersey, New York, Connecticut and California.

Buyers may be reluctant to purchase homes in those states – or choose a smaller house – if they calculate they will pay too much in non-deductible taxes. “These states may see softer housing markets compared to the rest of the country,” said Yun, if the SALT cap hurts enough homeowners.

The bottom line

If you’re a seller: Price realistically and be ready to cut the listing price or offer other incentives to get a deal done. “It’s still a seller’s market, but not like it was,” Hale said. “Sellers need to be mindful of competition, especially for more expensive properties.”

If you’re a buyer: Don’t worry about going slow when making decisions. “There is less buyer competition and more inventory,” Yun said. “Buyers can take time to find the home that fits into their budget.”

Copyright 2019, USATODAY.com, USA TODAY, Janna Herron

TOP TIPS FOR STAGING YOUR HOME

A recent survey from the National Association of Realtors® revealed that 77 percent of buyers’ agents said staging a home makes it easier for potential buyers to visual it as their own. That’s why here at Breakthrough Broker, we believe staging is not to be overlooked! Here are our top tips.

  1. Dress up your yard. First impressions count, and the first one your home gives comes from the exterior. Mow the lawn, clean up shrubbery, rake any leaves, clean the walkway and driveway, plant in-season flowers, and pull up any unsightly weeds.
  2. Reduce personal items. Make it easier for buyers to imagine themselves making your house their home by removing personal photos and knick-knacks from shelves, walls, and counters. Instead replace them with clean, simple décor, such as abstract paintings, nature images, vases, plants, and more.
  3. Organize your storage areas. Storage is a huge selling point. Tidy up and clear out the accessible closets and cupboards in the home and make sure to point them out during an open house or showing.
  4. Appeal to the senses. Consider ways you can appeal to potential homebuyers’ other senses. During a viewing or open house, bake some fresh cookies or burn delicious smelling candles and play light, relaxing music in the background.
  5. Consider turning to an expert. With their knowledge of current trends and great eye for design, professionally certified stagers can transform a home in a variety of ways and have a keen sense of what homebuyers want and expect in a home. Investing in hiring a pro may pay off in dividends.

Locally Known… Globally Connected!
Jennifer Bailey, REALTOR® e-PRO®
Dale Sorensen Real Estate
772-559-5524 • veroluxuryhomes.comsearchinvero.com