Economists are sounding more upbeat toward the housing market this year. Realtor.com® has revised its 2019 housing forecast, reflecting optimism for a much stronger market. Lower mortgage rates are mostly behind the shifts in attitude.
Realtor.com® economists are projecting mortgage rates to average 4.5 percent by the end of the year—nearly a percentage point lower than they originally forecasted. The lower mortgage rates are increasing buyers’ purchasing power, despite a continued uptick in home prices.
“The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019,” says Danielle Hale, realtor.com®’s chief economist. “We believe 2019 will be characterized by lower, but still increasing, mortgage rates that will buoy home prices and sales by boosting buyers’ purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago.”
|2019 Mortgage Rates||2019 Home Prices||2019 Home Sales|
|Updated 2019 Forecast||4.5%||+2.9%||-0.3%|
|Original 2019 Forecast||5.5%||+2.2%||-2.0%|
Realtor.com® researchers also predict home prices to move higher than expected. “Falling mortgage rates have given home buyers more purchasing power to balance rising home prices, but that in turn is allowing for more home price growth than was expected in November,” realtor.com® notes in its report. Realtor.com® now projects home prices in 2019 to be 2.9 percent higher than in 2018, a 0.7 percent increase over its original prediction. That falls in line with the National Association of REALTORS®’ forecast on national median existing-home prices to increase around 2.7 percent this year.
Price acceleration is slowing compared to the last few years. Home prices are currently growing at a 3.5 to 4 percent year-over-year pace. So the rate of growth is still far slower than the past few years of 5 to 7 percent, researchers note.
Lawrence Yun, NAR’s chief economist, has forecasted existing-home sales this year to decrease by 0.7 percent to 5.3 million. The decrease is mostly due to a continued shortage of homes for sale in many markets. Looking ahead to 2020, he forecasts sales figures and prices to both increase by around 3 percent.
Lower mortgage rates are helping to give the housing market a boost this spring, economists say. Yun said in a recent report on pending home sales that he does not anticipate any interest rate increases from the Federal Reserve in 2019.
“If there is a change at all, I would say the Fed will lower interest rates in 2019 or 2020,” Yun said. “That would stimulate the economy and the housing market. But the expectation is no change at all in the current monetary policy, which will help mortgage rates stay at attractive levels.”