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By Brandon Cornett | July 6, 2018 | © HBI, all rights reserved

We’ve passed the midpoint of 2018, which means some home buyers are starting to look ahead to next year. And a lot of them share the same questions: What will the real estate market be like in 2019? Will home prices keep rising, level off, or drop next year? Will it be a buyers’ or sellers’ market in 2019?

4 Things the Real Estate Market Might Do in 2019

Tight supply and strong demand have boosted home prices in housing markets across the country, while presenting challenges for buyers. Mortgage rates rose steadily during the first part of 2018, and then leveled off during the early summer.

That’s where we are now, as of July 2018. But what’s over the horizon? While no one can predict future housing conditions with complete accuracy, we can make a few educated guesses. Here are four of them.

1. We could see an increase in new-home construction.

We’ve seen a recent uptick in building permits nationwide, which could lead to a much-needed increase in new-home construction in 2019.

In a June 2018 report, the National Association of Home Builders stated: “Over the first four months of 2018, the total number of single-family permits issued nationwide reached 279,302. On a year-over-year basis, this is an 8.4% increase over the April 2017 level of 257,719.”

But there’s a pretty long lag time between the filing of a construction permit and the completion of the project. So the U.S. real estate market in 2019 will probably continue to suffer from supply shortages, with not enough homes listed for sale to satisfy demand from buyers. Which leads to item #2 below.

2. Most markets will still favor sellers over buyers.

Inventory shortages affected many housing markets across the country during 2017 and 2018. And this will likely continue, to some extent, in 2019 as well. Limited supply is also one of the reasons for prediction #4 below. An imbalanced supply-and-demand picture will continue to put upward pressure on home prices in 2019.

Of course, all of these trends can vary from one area to the next. Some real estate markets across the U.S. are more “balanced” than others, with enough supply to meet demand. Most cities, however, are experiencing low levels of inventory at present. The tightest markets are in the west — California, Washington and Oregon. But nearly every state is touched by this.

3. Mortgage rates could approach 5%, for a 30-year loan.

Here’s the short version: Mortgage rates are higher now than they were at the start of this year, and experts are predicting they’ll climb even higher by the end of 2018.

Here’s the back story: The average rate for a 30-year fixed mortgage hovered below 4% for much of 2017. Then, at the start of 2018, it began a steady upward climb that lasted for three months. When this article was published, on July 6, 2018, the average 30-year mortgage rate was 4.52%. That was an increase of 57 basis points (0.57%) from the first week of January.

So clearly, rates are higher now than at the start of the year. The question is, what might they do going forward? And what will the real estate market do in 2019 if mortgage rates climb even higher?

In June 2018, the Mortgage Bankers Association (MBA) updated its long-range forecast. They predicted that average 30-year mortgage rates would rise to 4.9% by the fourth quarter of 2018, and inch upward in 2019 as well. Economists from Freddie Mac made a similar prediction recently.

What might the real estate market do in 2019, in response to rising rates? Well, assuming that event actually happens, we could see a decline in home purchases in the months ahead. But we don’t expect it to have a major impact on real estate sales.

The economy is strong and employment is high, so there is steady demand for homes in most housing markets across the country. A modest rise in mortgage rates probably wouldn’t do much to dampen it.

4. Home prices will continue rising in most U.S. cities.

Given the current supply-and-demand situation, it appears likely that home prices in most U.S. cities will continue to rise throughout 2019. This would be the continuation of an ongoing trend, rather than a new development.

According to Zillow, the median home price in the U.S. rose by 8.1% over the past year. They predicted that prices would rise by 6.5% over the next 12 months. This forecast was issued in July 2018 and therefore extends into the summer of 2019.

Of course, this too varies by region. Some cities might experience relatively small gains, while others could see a large jump in home prices. The biggest gains will likely be recorded in real estate markets with strong demand and short supply, like those in the Pacific Northwest and a few other areas.

Disclaimers: This article attempts to answer the question, What will the U.S. real estate market will do in 2019? These predictions are the equivalent of an educated guess. No one can predict future real estate trends with complete accuracy. This article is intended for educational purposes only and does not constitute financial advice.