WASHINGTON 鈥� The new year is just heating up, but experts say the housing market may finally start to cool down in 2019.
鈥淔or the last several years, we鈥檝e seen really frenzied home buying and prices tracking skyward, and I think in 2019 we鈥檙e starting to see a little bit of a shift,鈥� said Cheryl Young, senior economist with the housing website .
Increased prices, decreased inventory
Home prices are still on the rise, but Young said they鈥檙e climbing at a slower rate. Even still, affordability will be a deterrent for many homebuyers in 2019, due to high prices and a 鈥渞eally tight鈥� housing inventory.
鈥淲e don鈥檛 see a big infusion of supply coming on any time soon, and because those prices are still increasing and they鈥檙e outpacing wage growth, affordability is actually still getting worse, and that might finally slow down some home buying activity,鈥� Young said.
Higher mortgage rates
Mortgage rates are another major player in market projections for 2019. Last year, rates reached a seven-year-high. While they鈥檝e since dropped, Young expects they will 鈥済o up a little later this year,鈥� making homeownership even more challenging for those on a budget.
鈥淚f you can imagine people who are looking to buy a home and looking to lock in a mortgage, a fixed-rate mortgage, and [rates go] up, they know they鈥檙e going to be spending more every single month on housing,鈥� said Young, who added that increased mortgage rates may put some 鈥渄ownward pressure鈥� on home prices.
鈥淟ong term, what that really means is demand may go down a little bit because we鈥檝e seen a lot of people out there looking for homes, but the more expensive they get, the more people sort of hold off a little bit.鈥�
Millennials rush the market
As those in the millennial generation age into their 30s, more will enter the housing market. Student debt, which gets in the way of saving for a down payment, continues to be a hurdle for homeownership with millennials, but Young said the generation is, and will continue to be, the largest cohort jumping into the real estate market this year.
According to from realtor.com, millennials account for 45 percent of mortgages, compared to 37 percent of Gen-Xers and 17 percent of boomers.
Sellers get out of the driver鈥檚 seat
Sellers have held the upper hand for several years now 鈥� 鈥淭here was a lot of competition, not a lot of supply, so if you were a seller, you were in really good shape,鈥� Young said 鈥� but in 2019, their power will likely lessen.
Citing a recent Trulia survey, Young said Americans have a more pessimistic outlook on selling a home this year, compared to last.
鈥淎nd I think that鈥檚 really closely related to the fact that home-price growth is starting to slow, and those other indicators in the housing market with home sales dropping, those are the things that are making sellers a little bit more circumspect,鈥� she added.
Buying a home? Save up and be realistic
Young鈥檚 best piece of advice for buying a home in 2019 is to 鈥減repare, prepare, prepare.鈥� If you are saving for a down payment, keep at it; if you need to increase your credit score to qualify for a mortgage and get the best rate possible, do it.
And when you鈥檙e ready, Young said reach out to a local real estate expert.
鈥淲e have to remember that it鈥檚 still really tough right now in the housing market. Even though there have been signs that competition has been slowing down, you have to be realistic,鈥� Young said.
鈥淪o, with your real estate agent, think about what your must-haves are, what your trade-offs are, and that pertains to the things you鈥檙e looking for in a home, but also in terms of what you鈥檙e looking for in a neighborhood. Once you have that, I think you can really start being realistic and finding something that鈥檚 right for you.鈥�
