Everyone in the real estate market is looking forward to a more stable and profitable in 2019. This is what investors, homebuyers and sellers are hoping. But the latest numbers of the current market trends say otherwise. A lot of experts in the real estate warned to prepare for a weaker 2019 for several reasons, and this goes for the real estate market in general; whether you’re buying a house, selling, a landlord, house flipping or trading real estate stocks.
David Caleb Mutua and Carolina Wilson wrote an awesome article in Bloomberg about the builders brace for a weaker 2019 market primarily due to rate hikes biting into the demand. Read more about this very informative article below.
Builders Brace for Weaker 2019 as Rate Hikes Bite Into Demand
Image Courtesy of Laura Buckman/Bloomberg
Investors in U.S. homebuilders are holding their breath heading into the New Year as experts predict softening demand in 2019, mainly driven by higher borrowing costs.
Gradual interest rate hikes by the Federal Reserve helped slow the housing market in the second half, with weakness starting over the summer and becoming more pronounced in the fall. Confidence among U.S. homebuilders has plummeted to the lowest level since 2015, signaling that the industry’s struggles are intensifying, data released Monday showed.
To lure buyers, homebuilders are cutting prices. This is adding to margin pressures in an industry that’s yet to see any meaningful relief in development costs or prices for building materials, financing and labor, according to a report from Wells Fargo.
‘‘Sales of new and existing homes and new home construction continue to come in below expectations, and most of the leading indicators show the trend is likely to continue and perhaps intensify,’’ Wells Fargo analysts led by Mark Vitner wrote.
Homebuilder ETFs
Investors have also been yanking cash from exchange-traded funds tracking builders. The $811 million iShares U.S. Home Construction ETF, ticker ITB, has seen more than $1.2 billion worth of outflows this year, putting the largest fund tracking the industry on pace to lose the most assets since it started in 2006.
The $601 million SPDR S&P Homebuilder ETF, ticker XHB, has also bled cash, with investors pulling about $383 million this year. The fund’s stock prices has fallen 26 percent in 2018, compared with a 31 percent decline for ITB, because it equally weights its holdings rather than basing it on market capitalization, reducing exposure to some of the larger builders and boosting the presence of smaller firms that have done better. Read full article here…
While it’s true that real estate market growth could be weaker in 2019, some investors see this as an opportunity to start investing for the possible upside could be higher once the growth started to bounce back. As mentioned, there are reasons why the housing market growth is weaker than it seems, and Jessica Guerin of Housing Wire published an article about the possible reasons for the slowdown.
MarketWatch: 3 Reasons Why The Housing Market Is Weaker Than It Seems
The economy is relatively healthy, yet the housing market is showing signs of stress
Image Courtesy of Housing Wire
The economy is growing and our workforce is mostly employed, so why does the nation’s housing market appear to be backsliding? Something isn’t adding up, wrote Caliber Home Loans CEO Sanjiv Das in a recent article for MarketWatch.
Against the overall healthy economic backdrop, Das said one would expect to see a robust housing market. Instead, applications are falling, purchase volume is declining, and existing home sales are dwindling.
Here are three reasons why Das said the housing market is underperforming despite the strong health of the overall economy:
1. Student debt
Millennials comprise the largest customer base for mortgages, but many of them are saddled by student debt. A survey by the National Association of Realtors revealed that 46% of Millennials say they have a student loan balance of $25,000, and 49% said this was preventing them from obtaining a mortgage loan.
“When someone has too much student debt, they don’t have the cash to make a down payment on a mortgage, nor may they have the appetite to go further into debt,” Das stated. “That the largest group of home buyers is in this tenuous situation creates a significant drag on the mortgage market.”
2. Lack of inventory
The country is suffering from a housing shortage – averaging a shortfall of 370,000 unit – and that is driving home prices way up. And, an increase in home prices is turning potential buyers off.
“Moreover, because of the surge in prices, home purchase sentiment has fallen. There has been a 12% decrease in Fannie Mae’s sentiment index, meaning that homebuyers aren’t as keen on purchasing a home,” Das wrote. Browse the complete list here…
It is quite shocking that the housing market is weaker despite the fact that the U.S economy, in general, is relatively healthy, growing and the majority of the workforce is currently employed. Add on to that, if the underperformance continues despite a strong and healthy economy, the housing sector might also take the much broader U.S. economy with it.
Now here comes the much bigger question. With the housing market generally weaker, should it be the right time to buy a home? Should you sell? should you invest in stocks instead? Should you go start house flipping? These are a whole lot more questions must be answered in reference to the underperforming real estate market. Michael Larkin wrote an article to answer these questions in Investing.com.
Housing Market Predictions For 2019: Tough For Buyers, Sellers
The next 12 months will pose challenges to potential homebuyers and sellers, according to Realtor.com Chief Economist Danielle Hale.
“For buyers, they will have more inventory to choose from, which is a positive, but on the tough side they will see continued rising prices and higher mortgage rates, so affordability will be a challenge,” she told IBD.
Millennials, after delays following the Great Recession, are now the biggest homebuyer group. This huge generational cohort is boosting demand for entry-level homes. However supply remains limited.
The housing market in 2019 is also expected to be challenging for would-be sellers.
“In the last couple of years you could list a home at a high price, get multiple offers within a week or less, and they would be at or above asking price,” Hale said. “For sellers in 2019, people who watched their neighbors have these experiences in previous years, that might be what they’re expecting. But we don’t expect it to be that extreme a seller’s market.”
She said sellers should take an inventory increase into account when pricing their home, and to consider offering incentives to buyers.
More Balance For Housing Market In 2019
Mortgage Bankers Association Chief Economist Mike Fratantoni does sees reasons to be positive about the housing market over the next 12 months.
“I think next year will be closer to a balanced market for buyers, and because of the strong job market, and because you have a lot of millennial buyers entering the market, you’ll see a pickup in home sales through 2019 relative to 2018,” he told IBD.
The days of rapid house price run-ups may be over, MBA’s Fratantoni said. But he believes a calmer interest rate environment in 2019, rather than this year’s series of Fed rate hikes, will benefit the housing market. Click here to read the rest of this post…
In general, a lot of real estate market experts and investors are conservative when it comes to their expectations on the real estate and housing market in general for the year 2019, seeing a weaker growth and underperformance. While for some this is a sign of panic, it is actually also a good sign to sell your house.
There are a lot of real estate investors and homebuyers are taking this opportunity to own a house or start their investments. If you don’t know where to start, we at Dependable Homebuyers can help you sell your house fast and easy. Want to know more? Visit us on https://www.dependablehomebuyers.com now.
Dependable Homebuyers
1402 Belt St, Baltimore, MD 21230
(443) 266-6247
