Good Outlook for Housing in 2019

• GDP
• Unemployment
• Interest Rates
• Inflation
• Business Spending
• Energy
• Housing
• Retail Sales
• Trade Deficit

The housing market will perk up in 2019, after rising home prices and higher mortgage rates made homes too expensive for too many buyers in 2018. With mortgage rates now lower, sales and starts are poised for a rebound.

Housing starts should rise modestly in 2019, following a slow 2018. Housing starts ended last year with a whimper, plunging 11.2% in December. Starts of multifamily homes tumbled 20.4%. But even with that large drop, multifamily starts ended the year with a 5.6% annual gain, relative to 2017. Single-family starts fell 6.7% in December, closing a modest year for the sector. Builders are still facing a shortage of skilled labor and ready-to-build lots. They’re also finding it difficult to get loans to purchase and develop land.

Single-family starts should rise 2.5% in 2019. Mounting housing affordability issues and supply-side constraints will limit single-family construction this year to modest gains. One bright spot in 2019: Townhouse construction, which will rise by a brisk 24%. Builders see townhouses as a quick way to put up cheaper homes.

See Also: A Housing Shortage Looms as Builders Can't Keep Up

Multifamily starts will begin to level off this year, falling 0.6%. Apartment demand was strong in 2018, boosting multifamily starts. Given the sector’s strength last year, lower multifamily starts will still come in at a strong 380,000 units.

New-home sales will increase 2.1%. Over the past year, the median price for a new single-family home has fallen 11.9%. Many areas still face shortages of skilled workers, which is slowing down the pace of residential construction and new-home sales. A modest increase in new-home sales this year will give builders time to catch up and get through their construction backlog.

The spring selling season should be decent, as the market picks up a bit of pace after a tough winter. Two tailwinds that will likely lift sales in the spring: Lower mortgage rates and growing inventory. Mortgage rates have eased in recent weeks, making it easier for buyers to afford the monthly payments on a loan. Expect rates to stay near current levels this spring. New listings are growing moderately for the first time since 2013. Until recently, listings were flat or declining.

Existing-home sales will stop sliding and come in flat — an improvement from last year. Sales of existing homes dropped in January, despite slower home-price growth in recent months. They fell 1.2% from December, to a seasonally adjusted rate of 4.94 million. On a year-to-year basis, sales have dropped for 11 consecutive months. Inventory has started to grow, but still sits close to historical lows. The inventory increases in recent months indicate that more homeowners are putting their homes up for sale as price growth is slowing down across the nation. Existing-home sales will be largely flat, rising 0.2% this year.

Home price growth will slow down to a 4.0% annual pace by year-end. The S&P CoreLogic Case-Shiller National Home Price Index rose 4.7% in December from a year ago. The sizable increase in mortgage rates in early 2018 slowed down the rate of home value appreciation from 2017’s level. Home price growth has declined on a year-over-year basis for nine consecutive months, making prices a bit more palatable for buyers.

Sources:

• National Association of Realtors: Existing-Home Sales
  
• Department of Commerce, New-Home Sales
  
• Department of Commerce, Housing Starts