A New Year Story

Many economists say the housing market is likely to continue to ease gradually, rather than fall hard as it did a decade ago. Existing home sales posted their largest annual decline in seven years in November but climbed 1.9% compared with a month earlier. That suggests the market is stabilizing, albeit at a lower level than its heyday in 2017.

In much anticipated cheerful fashion, the 2019 ball has dropped leaving experts to evaluate how things may shift for housing going through the new year based on a rear view of 2018. Going forward, housing is certain to have its brighter moments if not for some dreary days due to lingering slippery conditions. Mainly though, all are hopeful for an energized housing environment ahead despite the notion that the “divergence between housing and economic performance has persisted for much of this year, defying predictions that healthy economic growth would pull housing out of its slump,” as stated by the Wall Street Journal. These days, experts are looking at factors including pending home sales, home-price growth, affordability, and inventory when making predictions for how housing players will fare in 2019. In terms of differing effects on buyer and sellers, the Wall Street Journal recently reported, “Price growth is set to end the year on a more muted note than it began, with prices growing by more than 6%. The slowdown has unnerved sellers, as many have been forced to cut prices after putting their home on the market…But more moderate price growth is a relief for many first-time buyers, taking the edge off higher mortgage rates.” While at first glance this seems like an uphill battle, experts are careful to note that there are two sides of the coin to consider when looking at home prices. On this, Zillow senior economist, Aaron Terrazas, suggests, “Slowing home price appreciation can be read by many as an ominous sign – a kind of canary in the coal mine – for a more general downturn to come. But for now, it represents a return to more balance between buyers and sellers.” That said, pages of the housing story are indeed turning leaving all to wonder how the chapter will end.

During the closing months of 2018, home sales across the country experienced a downturn. To this tune, the Wall Street Journal reports, “The recent decline in home sales reflects a lack of inventory and the rising cost of homes, which has priced many buyers out of the more desirable markets. Home prices are now at all-time highs and inventory levels in recent months have begun climbing back from their lowest level in three decades. Rising mortgage rates, which nearly touched 5% late this year as they climbed to their highest level in more than seven years, are the latest blow.” Further, given this, certain experts aren’t afraid to point the finger. In terms of the national drop in home sales, some suggest that the West is to blame given its pinch in affordability due to sky-high prices that have risen quite quickly. To this point, the National Association of Realtors chief economist, Lawrence Yun, points to sales stating, “All four major regions sustained a drop when compared to one year ago, with the West taking the brunt of the decrease. The West crawled back lightly, but is still experiencing the biggest annual decline among the regions because of unaffordable conditions.” With all of this, 2019 is already proving to be quite the page-turner.

Blog post courtesy of JMJ Financial, Dru Bertagni Mortgage Banker NMLS # 1068471 dbertagni@jmj.me

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