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The first 6 months of 2019 have undoubtedly been very promising to first-time homebuyers. Beautiful houses, with amazing scenery, alluring wall art canvases and gardens have witnessed an increase in prices that did not seem to end. However, the worrying trend has been slowing down since the New Year began, and mortgage rates plummeted to unanticipated lows. This development has, without doubt, been very pleasing to prospective homeowners, especially millennials who- in spite of well-known unwillingness to settle down- now have the desire to buy their own homes.
Towards the end of 2018, experts predicted that 2019 would be a buyer’s market. People who were planning to buy their first homes were encouraged to anticipate less competition than in previous years. However, the prediction is yet to come true. In most places across the world, it is still a seller’s market.
Will the trend continue? Is 2019 a good year to buy a house? Here is what you should expect in
the second half of the year.
The housing market will be driven by people who were born after 1985
According to analysts, 2019 is undoubtedly the year for anyone who intends to buy a house for the first time. At least 50% of all mortgages from a leading financier in the United States went to young people who wanted to purchase their first homes. Since even more millennials are reaching their prime, the numbers will definitely increase.
According to data obtained by the National Association of Realtors, approximately 40% of all people who purchased homes for the first time and about 20% of sellers in 2018 were between 25 - 35 years of age. As a matter of fact, millennials have made up the largest fraction of mortgage originations since 2017. In 2018, the youthful generation took up almost half of new mortgages and even overtook Generation X regarding overall loan volume originated.
There will be a marginal improvement of inventory
According to the most recent analysis by experts in real estate, inventory is steadily increasing for trade-ups as well as starter homes. However, demand may not be satisfied by the insignificant increment. The experts discovered that there was a 3.5% and 4.8% increase in starter home inventory and trade-ups between January and April 2019, in that order.
Compared to 2018, there has been a steady but marginal rise in supply in 2019. There is inadequate supply, particularly at lower price levels.
Total housing inventory is way below the average experienced before the global economic recession, and even though an upsurge in starter home stock can be beneficial, higher-priced market segments will reap most of the benefits.
There will be a remarkable increase in home prices
Since the year 2012, prices of homes have been increasing up until the first quarter of 2018, when they outstripped pre-recession highs. There has been no reversal of the trend ever since, and neither has it lost steam since 2019 began. For instance, between December 2017 and March 2018, home prices increased by 7%.
In the first half of 2019, prices jumped by a paltry 3.7%. The slowdown together with accelerated wage- growth are two major factors that are making the property more affordable for anyone who wishes to buy a house.
In spite of the enhanced affordability, increasing demand for homes against a limited inventory of property available for sale simply means that acceleration in price increase may occur very soon.
Low mortgage rates
Rates of mortgage plummeted to the lowest levels in the first quarter of 2019, something that was last experienced in 2016. The average was about 4%. The astonishing decline led to a refinancing (refi) rush in mid-2019 when refi made up more than 50% of all mortgage deals in just one week.
According to experts, the trend will continue for the next few months. As a matter of fact, mortgage rates could plummet even further.
The Federal Reserve in the US has opted to loosen their purse strings due to a slowdown of global economic activity. Consequently, there has been a remarkable decrease in interest rates, and they could plummet even further if the Federal Government implements measures that would lower interest rates to promote economic growth.
Buyers should not be in any hurry
Competition for homes will be less than what the situation has been in years gone by, the influx of youthful homebuyers notwithstanding.
In April 2019, a vicious bidding war was ignited by a simple 15% of offers. This was a remarkable drop from 60% that was experienced in April 2018.
Hot property markets have not been spared. In San Francisco, for instance, bidding wars plummeted to 22% from peaks of 75% between January and May 2019.
Is 2019 a good year to buy a home? Well, buyers in the United States and other countries across the world are not rushing to acquire real estate property. Therefore, anyone who intends to buy a house for the first time should not be in any hurry.
About the Author:
Lena is an interior designer at Homes in London, and she loves to be able to help her clients create their dream home because she believes that home isn't just a place, it's a feeling. She is confident that her experiences can help a lot of people so she expresses it through writings. If you need design advice, feel free to reach out to her as she will always be available for those in need. :)