Lower mortgage rates increase purchasing power; home prices exceed original predictions and sales stronger than originally forecasted
SANTA CLARA, Calif., (April 23, 2019) — Realtor.com®, the Home of Home Search℠, today released a revised 2019 housing forecast, which shows the outlook for the real estate market this year is somewhat stronger than originally forecasted. Based on a shift in the economic outlook and slower pace of monetary tightening, the online real estate destination is now expecting lower mortgage rates of 4.5 percent by the end of the year, higher home price growth of near 3 percent and stronger homes sales.
|2019 Mortgage |
|2019 Home |
|2019 Home |
|Updated 2019 Forecast||4.5%||+2.9%||-0.3%|
|Original 2019 Forecast||5.5%||+2.2%||-2.0%|
“The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019,” said Danielle Hale, realtor.com®‘s chief economist. “We believe 2019 will be characterized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers’ purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago.”
Mortgage rates will end the year lower than originally expected
At the end of 2018, mortgage rates approached 5 percent and this upward momentum was anticipated to continue well into 2019 due to continued economic growth and monetary policy tightening. However, after an unfavorable reaction to the December rate hike, the Fed pledged “patience” ahead of future monetary policy moves.
The change in economic outlook paired with a pledge of patience has brought long term rates down to just over 4 percent, levels last seen in January 2018. Realtor.com® now expects rates to begin drifting upward as data suggests continued economic growth. Due to their lower 2019 starting point, mortgage rates are expected to approach 4.5 percent by the end of the year — nearly a percentage point lower than originally expected.
2019 home prices forecasted to be higher than expected
Falling mortgage rates have given home buyers more purchasing power to balance rising home prices, but that in turn is allowing for more home price growth than was expected in November. As a result, realtor.com® now anticipates home prices in 2019 to be 2.9 percent higher than in 2018 — a 0.7 percent increase over its original prediction.
Although home prices are currently growing at 3.5 to 4.0 percent year-over-year, the rate of growth is far slower than the past few years of 5 to 7 percent growth, indicating prices are softening.
Home sales will fare better than originally predicted
After a 10-year high in 2017, home sales slipped in 2018 and are on track to end 2019 with 5.3 million homes sold, essentially flat with 2018. Initially, realtor.com® projected home sales to slip 2 percent further in 2019, but the combination of lower mortgages rates and an influx of inventory have spurred sales.
Realtor.com®, The Home of Home Search℠, offers an extensive inventory of for-sale and rental listings, and access to information, tools and professional expertise that help people move confidently through every step of their home journey. It pioneered the world of digital real estate 20 years ago, and today is the trusted resource for home buyers, sellers and dreamers by making all things home simple, efficient and enjoyable. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. under a perpetual license from the National Association of REALTORS®. For more information, visit realtor.com®.