Housing forecast highlights you need to know. Whether you’re buying a home, selling a home, or investing in real estate here’s what you need to know about the housing market in 2019.
It’s that time of year again. In addition to unwrapping packages and stuffing yourself with sweets, real estate industry observers have been at it, creating their housing forecasts for 2019. Here’s a sampling of what’s coming through my inbox, as we all get ready to start the new year:
Realtor.com expects real estate housing inventory to increase modestly in 2019. But unless there’s a major shift toward a recession, the company doesn’t anticipate a buyer’s market on the horizon within the next five years.
That largely has to do with a lack of inventory – both because sellers still aren’t selling and builders aren’t building. National housing inventory increases are anticipated at less than 7 percent, but high-end inventory in major metros will see the most growth. Major metro areas that could see double digit gains in inventory in 2019 include:
San Jose, Sunnyvale and Santa Clara, CA
Seattle, Tacoma, Bellevue, WA
Worcester, Mass, CT
Boston, Cambridge, Newton, MA
Nashville, Davidson, Murfreesboro, Franklin, TE
While these are all major metro areas, there’s growth in store for some rural areas in 2019 as well. The Urban Institute predicts industrial development is in for a good year not only in ports and hub cities, but also in “last- mile” break-bulk sites.
From a new housing perspective, the annual construction rate is 370,000 units below the level required by long-term housing demand, according to research by Freddie Mac. Freddie Mac calculated there are at least 50,000 American households each year that can’t buy or rent a home because it hasn’t been built. (Tough to live in a place that doesn’t exist.) But why are developers having problems? Freddie Mac says identified housing costs (i.e. the cost of land and materials) and a labor market that continues to struggle for workers as the biggest impediment to household formation.
The National Association of Home Builders confirmed a labor shortage in the construction industry, reporting that in 2018 unfilled jobs in the U.S. construction industry reached a post-Great Recession high.
“From 1968 to 2008, a span of 40 years, there was only one year in which fewer new housing units were built than in 2017—and this despite rising demand in a growing economy,” said Sam Khater, Chief Economist at Freddie Mac. “We estimate that over the next decade, young adults will add about 20 million households, and those households will need a place to live. Until construction ramps up, housing costs will likely continue rising above income, constricting household formation and preventing homeownership for millions of potential households.”
I’ve had plenty of my own concerns about Millennials lagging nearly 10 percent behind other generations when it comes to homeownership. Limited availability and lacking affordability is a cause for their homeownership delay that goes far beyond generational differences.
Building inventory and construction also has to contend with the aftermath of natural disasters. Last year, 15,000 homes were destroyed by wildfires in California alone. Natural disasters are escalating in frequency and magnitude and in response builders are focusing on preventative and/or protected building materials and designs. Zillow predicts slower, more costly building after natural catastrophes, due to rising costs and insurers’ reluctance to offer policies in danger zones.
It’s not just about new construction. Even existing-home sales have also slowed. According to a housing market outlook from Reuters for 2019, “Existing-home sales, which make up about 90 percent of overall sales, are forecast to average around an annualized rate of above 5 million units per quarter this year and next, well below the 7 million units during the housing market boom in 2005.”