With the Spring comes many things, and among them our final predictions for the year. In recent “Market Update and News” we shared what we were watching. This month we’re breaking out our crystal ball!
While many federal workers – and related contractors – were waiting for paychecks in early 2019, new contracts on homes were up 70 percent from early last year, even with the number of listings down 20 percent. Mortgage interest rates are at a 11-month low and our regional home sales are at a 10-plus year high – that makes for an active market. Here’s what we see for 2019:
Home prices will increase, with neighborhood by neighborhood exceptions. Bright, our local MLS, reports that the average percent of original list price received at sale was 97.2 percent early this year — the highest list-to-sale for the D.C. metro area in a decade. The median price is up 5 percent from a year ago – the 28th consecutive month of year-over-year price increases. We’ve also had 4 months in a row where price appreciation has exceeded 5 percent.
Millennials drive the hottest markets. Neighborhoods in, or close to, downtown and vibrant areas have will continue to draw Millennials. These areas have done better than average. This trend continued in 2018, with above-average home price growth in areas with the most millennial buyers who now dominate the first-time homebuyer market.
Less Affordability, More Mortgage Programs. Interest rates are down but projected to go up again. With home prices increasing, affordability is hurt. Even though higher interest rates reduce home sales, modest increases in mortgage rates are not apocalyptic. Historically, rising rates caused only temporary, mild slowdowns – not price drops. If rates increase this year, fewer people will refinance, there will be fewer trade-up home sales, which will reduce the number of homes for sale – with upward pressure on prices.
There’s No Bubble. Why? No widespread housing bubble exists. The typical warning signs — excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and a high number of internet searches on house flipping. The only red flag at present is declining affordability. With flipping happening in areas with low inventory, and interest rates below the historical average, home prices are more supportable than 10 years ago.
As always, we’re watching these and other market factors closely. We know they affect you, whether directly or indirectly. If we can help you make sense of what this means for you and your specific situation – buying, selling, investing, or just staying in place – let us know. We’re here to help!