We’re more than halfway through 2019, and it has already proven to be a very interesting and tumultuous year in real estate. New listings have been steadily on the rise, even though hikes in the interest rate at the close of 2018 created a lot of uncertainty for this year’s housing market. Additionally, trends that have remained in place for the last decade are beginning to reverse, particularly as it relates to rising wages and stagnating housing prices. But what does the rest of the year have in store for potential home buyers and other real estate investors? Let’s take a look at a few of the latest trends in real estate, as well as our most up-to-date predictions for the rest of the year.
Houses Are Becoming More Affordable Again
While wages have remained relatively stagnant over the last decade, housing prices have continued to rise, making real estate an unrealistic or even impossible investment for many Americans, especially those just entering the job market. However, that trend is beginning to reverse. Average wages are climbing slowly upward, and housing prices continue to rise as well, though the latter category is rising at a much slower rate than in the past.
Surprisingly, analysts have expected this change for a while. When looking at the housing market as it compares to average wages, the market tends to act much like a rubber band. It may be stretched so that prices outpace wages for an extended period of time (as it has in recent years), but at one point or another, the rubber band must snap back together. When this happens, these prices and wages become much more equal, making it easier for consumers to invest in new real estate.
Uncertainty Will Continue In the Short-Term
At the end of 2018, the Fed intended to raise interest rates two times over the following year. However, they seem to have reversed course, though it remains unclear if they will actually lower the benchmark interest rate or follow through with their original projections. Nonetheless, mortgage rates have dropped a full percentage point in anticipation of these changes, giving home buyers more incentive to invest.
That said, mortgage rates could still rise if the Fed does decide to increase interest rates once again. And even if they do lower or maintain interest rates, this does not mean that the housing market will suddenly react. It will take time for these rates to have an effect, and in the meantime, mortgage payments will remain the same. So, until the Federal Reserve makes a clear decision one way or the other, it will be difficult to gauge how mortgage rates will be affected.
Not Every Location Is Following National Trends
While things are generally looking up for home buyers, the situation varies widely depending on the local market. Overall, the country is shifting from a seller’s market to a buyer’s market. However, no two states or cities are exactly the same. Cities with lower costs of living have remained strong for home sellers, as job creation and high wages have increased the pool of potential buyers.
However, the market in cities like Chicago is very different. Sellers far outpace buyers, giving those looking to invest in real estate more room to negotiate, driving prices down. Changing laws have also caused an increased desire for mobility. For example, many consumers are choosing to move out of states with higher income taxes.
Prices Will Continue to Drop as Construction Ramps up
Looking to the second half of 2019, analysts are confident that the housing market will continue its upward trend. Though the future is not entirely clear (thanks in large part to uncertainty surrounding interest rates), prices are not rising as quickly as before. Additionally, investors have started to reenter the market, having initially left in the wake of the 2008 crisis.
As investments increase, construction will ramp up, increasing the inventory and driving down prices. Provided that wages continue to rise, this will make for a much more affordable market for buyers going forward. While this may sound like a bad sign for sellers, it will actually lead to a much healthier market.
As it stands now, many younger Americans struggle with the idea of balancing their budget and setting aside money for a home. Many houses remain unsold as a result. However, prices are dropping while wages are rising, and the Fed would like this trend to continue for as long as possible. So, while it is impossible to predict the remainder of 2019 with perfect clarity, it seems that the market will become much more agreeable for buyers, sellers, and investors in the second half of the year.