While no one knows for sure where the housing market will go in 2019, predictions are necessary for homeowners, sellers, buyers, and investors. Many factors that affected the market in 2018 remain unchanged and will impact the housing market in 2019 and beyond.
New Home Construction
Current demand for new homes is outpacing their construction. Several factors are contributing to this; the top four are listed below:
- Shortage of skilled labor
- Tariffs on building materials
- The crackdown of immigration means fewer people in manual labor jobs
- Rising interest rates adversely affect the ability of builders to borrow money
All these factors and more have led to a flattening out of new housing starts. While some analysts believe that new housing starts will rise in 2019, there is virtually a 100% agreement that it will not be enough to keep pace with demand.
Millennials as a Market Driver
In the broad scheme of things, millennials took longer to enter the housing market than prior generations may have. They are making up for that with gusto and are a driving force in home sales. For the fifth consecutive year, Millennials had the highest share of home buying activity according to the National Association of Realtors in it’s 2018 Home Buyer and Seller Generational Trends study.
“Just over one-third of all home purchases were made by Millennials, who held a market share of 36% over the past year, up from 34% in 2017.”
In a statement by Ellie Mae Executive Vice President of Corporate Strategy Joe Tyrrell, it was noted that, “Most Millennials are buying a house because there are major changes happening in their lives such as starting a family, getting a new job, or because they’ve decided that they want to build equity and stop renting,”.” According to the U.S. Census Bureau, there are 326,766,748 people in the United States, 83.1 million of that are millennials or a little more than 25% of the population.
Baby Boomers are living longer and choosing to stay in their own homes longer, according to a report from Harvard’s Joint Center for Housing Studies. This means there are fewer homes entering the market for resale.
Many analysts feel that the current “Sellers’ Market” will continue, but at a slower rate. They predict that:
- There will be more new home housing starts in 2019 but not nearly enough to cover the demand
- Inventory of homes for sale will continue to drive home prices up
- Rising interest rates will make home affordability more of an issue
- Economic growth should continue