Housing Outlook for 2019

As always, we like to go over what happened in the prior year and give you a look in what’s happening into the coming year. Let’s talk about the economy. There’s a few things we watch in the economy which become the foundation of real estate. These things are:

As you’ve been hearing in the news, economic growth grew at a substantial rate last year- 3.1%. To put that in perspective, anything over 2% growth is considered very strong.

Unemployment is at a 50-year low. We’re at full employment in our country; anything less than 4% unemployment is considered a full employment, and we finished the year with 3.7%.

Wages, the amount of money people are earning, went up 3.1% in 2018. That’s a 10-year high.

People are making more money, there are more people working, and the economy is growing. These are all strong foundations for real estate. In 2019, we’re going to see a similar landscape, pending any catastrophes happening, with all those foundations of real estate. Now, as for the data with real estate, we study 5 things. These 5 things are:

Interest rates have been climbing since December 2017. Interest rates are up between 15 and 20%. There were 3.95% on a 30 year fixed back in December 2017. Now, we’re pretty much at 4.5%. Interest rates are showing signs of upward motion and facilitating back and forth. We just got news from the Federal Reserve that they’re going to be flexible in 2019 regarding setting their overnight lending rights to banks, which could keep interest rates where they are right now. The risk to the market is in interest rates moving up higher.

We had a second year in a row of declining unit sales in the United States, and also declining sales in Massachusetts. The United States finished the year down 7% at $5.32 million in sales, and in Massachusetts we finished the year with $80,000 in sales. It’s okay to have some declining years, as long as we’re within a sustainability zone of housing sales, which we are. So that’s okay, we’re not worried about that and it shouldn’t be cause for panic.

Prices have increased year over year, and last year was no change. We are at a 4.6% increase to $264,000 in the United States for the median sale price of a home, and in Massachusetts up 5% to $395,000 being the median sale price of a home. Again, in 2019 we expect to see further increases in price.

Inventory is really where the problem has been. As you’ve been hearing, and the reason why we’re having lower unit sales, is lack of inventory. We measure in terms of months of inventory, and in the United States we currently have 3.9 months supply of inventory. To put that in perspective, a normal market should have between 4 and 6 months of inventory. In Massachusetts, that number is even lower. On average, it’s a 2 month inventory cycle right now. So you might hear people saying, “Oh no, inventory is increasing!” Yes, inventory is increasing, but off such a low bottom that it really isn’t anything to be super alarmed about. In fact, it’s a good thing to see a little bit of pressure relief on inventory. Buyers will get a little bit of relief that the spring market may not be as difficult as last spring market.

The final thing we track is affordability. Affordability is simply the ratio of median income to the median mortgage fee per month. Right now, that number nationally stands at 17. To put that in perspective, in the market peak of 2007, the affordability index was 26. At the market bottom of 2012, the affordability index was 11. So, you can see we’re moving up off the bottoms for affordability, because prices are going up but interest rates have stayed so level and wages have increased, so homes are still very affordable. So again, even though we’re seeing prices increase, don’t think that you might not be able to afford a home.

Hopefully this information filled you in on the marketplace and the economy! Contact us at 978-494-0346!