Real estate closing

Average Closing Costs in U.S. and 33 Largest Metros, as of 2018

A housing report published in October showed the average amount of closing costs paid by a “typical” home buyer in 33 of the largest metropolitan areas in the United States. Nationally, home buyer closing costs averaged $6,246 in July of 2018. Among the metros included in this report, costs were lowest in Cincinnati, Ohio ($4,259) and highest in the New York City area ($11,232).

Average Closing Costs Among Home Buyers: 2018

This report was created by the real estate information company Zillow and the San Francisco-based company Thumbtack. Though it was published in October, it used home-price data from July of 2018. Those home values are likely higher now than they were back in the summer. So the average closing costs might be a bit higher as well.

Still, this analysis gives us some insight into what a typical home buyer pays to close on a home. It also provides a good comparison between buying costs in different parts of the country.

The following table was adapted from the Zillow / Thumbtack report:

Metropolitan Area Median Home Value (July 2018) Closing Costs
United States $218,000 $6,246
Atlanta, GA $206,300 $4,877
Austin, TX $298,000 $6,352
Baltimore, MD $264,700 $8,196
Boston, MA $456,400 $8,410
Charlotte, NC $196,800 $4,411
Chicago, IL $219,800 $7,322
Cincinnati, OH $162,000 $4,259
Cleveland, OH $141,500 $4,286
Columbus, OH $182,600 $4,286
Dallas-Fort Worth, TX $231,100 $6,352
Denver, CO $397,800 $5,962
Detroit, MI $156,100 $4,366
Houston, TX $199,300 $6,352
Kansas City, MO $182,600 $5,012
Las Vegas, NV $266,200 $5,559
Los Angeles-Long Beach-Anaheim, CA $643,300 $7,674
Miami-Fort Lauderdale, FL $275,700 $7,398
Minneapolis-St Paul, MN $261,300 $5,271
New York, NY $429,700 $11,232
Orlando, FL $228,700 $7,398
Philadelphia, PA $228,400 $6,701
Phoenix, AZ $256,000 $4,849
Portland, OR $391,800 $5,403
Riverside, CA $358,600 $7,674
Sacramento, CA $400,800 $7,674
San Antonio, TX $185,900 $6,352
San Diego, CA $584,100 $7,674
San Francisco, CA $954,100 $7,674
San Jose, CA $1,292,600 $7,674
Seattle, WA $487,600 $5,741
St. Louis, MO $161,800 $5,705
Tampa, FL $205,900 $7,398
Washington, DC $397,500 $8,201

Charges and Fees for a Real Estate Transaction

Closing costs are the various fees and charges that can accumulate during a typical real estate transaction. Both the buyer and seller can incur them. The buyer’s closing costs are usually higher, especially when a mortgage loan is being used to complete the purchase.

They can be paid separately by the individual parties, or the seller can agree to cover some of the buyer’s costs. It varies. These kinds of details are typically ironed out during initial negotiations and written into the purchase agreement. Who pays what will largely depend on the current state of the local real estate market, and which party has more negotiating leverage.

Closing costs can vary widely from region to region, partly due to differences in housing costs, taxes, etc. You can see this clearly in the table above.

They can also vary from one home buyer to the next within the same region. For instance, some borrowers choose to pay points at closing in exchange for a lower mortgage rate. Others choose to forego this extra upfront cost, taking a higher interest rate instead. This is just one example of a variable that can affect the buyer’s finalized closing costs.

According to the Zillow report mentioned earlier:

“Closing costs add thousands more to the total amount buyers should be prepared to pay. These costs frequently include the origination fee, appraisal, transfer taxes, the first year of homeowners insurance, title insurance, and more. These add about $6,250 to buyers’ expenses on the home purchase for the median home.”

On average, closing costs for buyers in the U.S. range from 2.5% to 5% of the purchase price. Borrowers with limited funds in the bank could potentially reduce their upfront costs by comparison shopping among lenders, skipping the discount points, and asking the seller to make a concession.

Median Down Payment for Home Buyers Hits All-Time High in 2018

According to a report published in September by ATTOM Data Solutions, the median down payment among home buyers in the U.S. hit an all-time high during the second quarter of 2018.

The nationwide median was $19,900 during the second quarter. San Jose, California topped the charts with a (mind-blowing) median down payment of $306,000. Three other California metro areas rounded out the top four, followed by Boulder, Colorado.

Home Buyer Down Payments Reach All-Time High in 2018

According to the report published last month, the median down payment for single-family home and condo purchases was $19,900 during the second quarter of 2018. That was an increase of 19% over the previous quarter, when the median was $16,750. It also marked “a new record high going back as far data is available,” said the report.

This analysis included 103 metropolitan areas across the United States. Out of those 103, the metro areas with the highest median down payments in Q2 2018 were:

  • San Jose, California ($306,000)
  • San Francisco, California ($220,000)
  • Los Angeles, California ($130,000)
  • Oxnard-Thousand Oaks-Ventura, California ($115,400)
  • Boulder, Colorado ($107,750)

The numbers in parentheses might look like home values, at first glance. But they’re actually the median down payments among home buyers during the second quarter, for each of those metros. (So yes, a typical down payment on a house in San Jose is higher than the average home value for the U.S. The word “anomaly” comes to mind.)

This report also identified another group of metro areas with median down payments of $60,000 or higher, during the second quarter. They included:

  • San Diego, California ($90,400)
  • Boston, Massachusetts ($79,925)
  • Seattle, Washington ($70,100)
  • Fort Collins, Colorado ($68,050)
  • Among others

But home buyers in these metro areas who can’t afford such a large down payment shouldn’t fret too much. In fact, depending on the kind of loan program you use, your minimum required investment could be significantly lower than the figures mentioned above.

Median and Minimum Are Two Different Things

To be clear: the numbers shown above do not represent the minimum down payment required for different mortgage programs. These are just the median figures.

By definition, the median is the midpoint for a data set. So in this case, half of all home buyers in each metro area made down payments above the median figure, while the other half put down less money than that amount.

Minimum down payments are a totally different story. For instance, borrowers who use a conventional home loan to buy a house could qualify for a down payment as low as 3% of the purchase price. Similarly, the Federal Housing Administration (FHA) loan program allows eligible borrowers to make an upfront investment as low as 3.5% of the purchase price.

So why are the median figures so much higher than these minimums? Some borrowers choose to make larger down payments, and for a couple of reasons:

  • Some do it because they want to minimize the loan amount and the size of their monthly payments.
  • They also do it to avoid paying mortgage insurance, which is usually required when the loan-to-value ratio rises above 80%.

Borrowers who make these larger upfront investments push the median and average down-payment figures higher than the minimum requirements mentioned earlier.

Conclusion: Rising home values have forced home buyers to make larger investments on their purchases, in terms of the actual dollar amount. Nationwide, the median down payment for single-family home purchases (where a mortgage loan was used) rose to $19,900 during the second quarter. That was an increase of 19% over the previous quarter. But it’s possible to make a smaller investment, as little as 3% for a conventional loan and 3.5% for FHA.

New Document Rules Could Help Self-Employed Mortgage Shoppers Get Approved

A bipartisan Senate bill introduced in August 2018 could make it easier for self-employed and “gig economy” workers to qualify for mortgage loans, by allowing lenders to use more documents during the underwriting process.

Self-employed home buyers tend to encounter more hoops and hurdles when shopping for a mortgage loan, and much of it has to do with documentation. Self-employed workers sometimes lack the income-related documents of a person with traditional employment. And this can make it harder for them to prove their income.

A new piece of legislation working its way through the Senate could change that. If passed, it would allow mortgage lenders to use additional documents (like the IRS form 1040) when reviewing mortgage loan applications from self-employed borrowers.

More Documents Allowed for Self-Employed Mortgage Shoppers

In August 2018, U.S. Senators Mark R. Warner (D-VA) and Mike Rounds (R-SD) introduced a bill that is officially known as the Self-Employed Mortgage Access Act of 2018. And its name signals its intent. The proposed legislation is designed to boost mortgage access among self-employed workers and “other creditworthy individuals with non-traditional forms of income.”

It would do this, in theory, by allowing lenders to use a broader range of documents when considering loan applications.

The Self-Employed Mortgage Access Act would allow mortgage lenders to use the following documents:

  • IRS Form 1040 Schedule C for sole proprietorships
  • IRS Form 1040 Schedule F for farming industry workers
  • IRS Form 1065 Schedule K-1 for partnerships
  • IRS Form 1120-S for S Corporation workers

We should clarify at this point that self-employed mortgage shoppers can qualify for financing — even under today’s guidelines. It happens all the time. But they often have to jump through additional paperwork hoops along the way.

Banks and lenders frequently request profit-and-loss (P&L) statements from self-employed mortgage applicants, as well as other documents that traditionally employed borrowers do not have to provide. The changes being proposed in this bill could simplify the path to mortgage approval.

According to Senator Warner, one of the bill’s proponents:

“An increasing number of Americans make their living through alternative work arrangements, like gig work or self-employment. Too many of these otherwise creditworthy individuals are being shut out of the mortgage market because they don’t have the same documentation of their income — paystubs or a W-2 — as someone who works 9-to-5.”

This bill is designed to alleviate some of those document-related issues, thereby increasing mortgage access for self-employed borrowers.

Supported by Key Industry and Consumer Groups

Most legislation proposed at the federal level has to be approved by members of both the Senate and House, and then be signed into law by the president. To date, this bill has only been introduced within the Senate. So it has a ways to go.

But it also has some momentum behind it, which could lead to an eventual passage. For one thing, it is being supported by key industry groups (i.e., lobbyists) such as the Mortgage Bankers Association. Even a few consumer advocacy groups have voiced their support.

Barry Zigas, Director of Housing at the Consumer Federation of America, said the Self-Employed Mortgage Access Act “would provide common sense direction to the [Consumer Financial Protection Bureau] in its application of the statutory requirements and give lenders and consumers alike an easier, less burdensome way to meet these tests.”

Typically, when a piece of legislation has broad support and few detractors, it eventually becomes law. But only time will tell. We are monitoring this bill and will report on any new developments as they arise.

The key takeaway here is that, if passed, this bill could ease the requirements for self-employed borrowers seeking a mortgage loan. It would allow them to provide alternative documents to verify their income. And that seems like a positive change.

Two Best Ways to Improve Your Credit Score Before a Mortgage Application

A new report from the credit score developer FICO reveals two of the best ways home buyers can improve their credit scores before applying for a mortgage loan. Pay your bills on time, and reduce your “amounts owed.”

We’ve known for some time that “payment history” and “amounts owed” are the two biggest factors that can influence a person’s credit score. But now we have some in-depth analysis to support that claim.

Why Credit Scores Matter to Mortgage Applicants

Your credit score is a three-digit number that’s computed from the information contained within your credit reports. Those reports are a record of your borrowing history dating back several years, and they include things like credit cards, auto loans, mortgages, etc.

FICO scores are produced by the company of the same name. They are commonly used by banks and lenders when reviewing loan applicants, such as home buyers applying for a mortgage loan.

The FICO scoring range goes from 300 to 850. A higher number is better. Home buyers with higher credit scores tend to qualify for lower mortgage rates. They also have an easier time getting approved for loans in the first place.

On the other hand, borrowers with lower scores tend to pay more in interest and might have a harder time qualifying for financing.

The bottom line: if you’re planning to use a mortgage loan in the near future, you should know (and care about) your credit score. It will affect everything from your ability to quality for financing, to the interest rate that’s assigned to your loan.

Improving Your FICO Score

But what if you’re one of the folks with a relatively low score? How can you improve your credit score before applying for a mortgage loan? Two of the best strategies are to (A) pay your bills on time going forward, and (B) consider reducing your debt load or “amounts owed.” These factors weigh more than any other when it comes to the automated credit-scoring formulas.

FICO scoring factors

Which brings us back to the FICO report mentioned earlier. They company analyzed FICO score distribution data among home buyers who used a mortgage loan to buy a house. The resulting report offered a wealth of insight into how these score are generated, and how they affect consumers who are shopping for a home loan.

They also highlighted two ways a person could improve a credit score before applying for a mortgage loan. One strategy is for consumers with higher recurring debt balances to reduce those debt loads. High credit card balances were singled out, in particular, because those can have a negative impact on a person’s credit score.

As the report stated:

“Our analysis found that consumers with a FICO® Score increase were more likely to have reduced their amounts owed. ‘Amounts owed’ makes up about 30% of the FICO® Score calculation; not having high revolving balances and paying down installment debt are two indicators of a healthy credit profile.”

That company explained that those consumers with an increase in their credit scores reduced their credit card balances by an average of 49%.

Here’s the part that relates to payment history:

“We also found that as of April 2018, consumers with a decrease in [their scores] were much more likely to have had a missed payment in the past year. ‘Payment history’ is the most important category within the FICO® Score, comprising ~35% of the total score calculation.”

It bears repeating: How you pay your bills counts more than any other factor, when it comes to calculating that three-digit number. Consumers who regularly miss payments on things like credit cards and car loans tend to have lower scores, while those who stay on top of their bills usually have higher numbers.

One Piece of a Bigger Picture

Credit scores are one of the most important qualification criteria for home buyers seeking a mortgage loan. But they’re also part of a bigger picture. Banks and mortgage lenders look at a variety of factors when considering applicants for a loan.

In addition to credit scores, they also look at the amount of money a person earns relative to the amount they spend on their recurring debts. The debt-to-income ratio, as it’s known, is another important factor that can determine whether or not you qualify for a mortgage loan. Income stability is another key factor when it comes to getting a home loan.

That three-digit number is important for mortgage applicants. But it’s not the only consideration.

Disclaimer: This article offers tips on how to improve a credit score before shopping for a mortgage loan. That information was adapted from a report provided by the FICO credit-scoring company. Their information and findings are deemed reliable but not guaranteed. The publishers of this website make no claims about the efficacy of the above-mentioned strategies and advise consumers to conduct additional research.

Home-Price Appreciation Forecasts for the 35 Largest U.S. Metro Areas

Home price metaphor

Home values in most U.S. cities have risen steadily for the last few years, and a recent home-price forecast suggests this trend could continue into 2019.

A team of housing analysts and economists from Zillow recently published a home-price appreciation forecast for the 35 largest metro areas in the U.S. House values are expected to rise in these and most other parts of the country over the coming months.

According to an August 2018 news release from the company: “Home value growth is slowing in almost half of the 35 largest U.S. metros, with Sacramento and Seattle reporting the greatest slowdown since the beginning of the year.”

Despite this slowdown, they’ve also issued positive home-price appreciation forecasts for 34 out of the 35 metro areas in the report. In other words, house values aren’t rising as fast as they did over the last couple of years — but they’re still climbing.

Home Price Forecasts Into Summer 2019

The table below shows the 12-month home price outlook for the 35 largest housing markets in the U.S.

Metropolitan Area Home Value Forecast for Next Year*
Atlanta, GA 6.90%
Austin, TX 2.80%
Baltimore, MD 4.80%
Boston, MA 8.10%
Charlotte, NC 3.30%
Chicago, IL 7.10%
Cincinnati, OH 5.40%
Cleveland, OH 3.10%
Columbus, OH 5.40%
Dallas-Fort Worth, TX 7.80%
Denver, CO 5.10%
Detroit, MI 9.00%
Houston, TX 1.50%
Indianapolis, IN -1.30%
Kansas City, MO 3.10%
Las Vegas, NV 8.00%
Los Angeles-Long Beach-Anaheim, CA 12.10%
Miami-Fort Lauderdale, FL 5.40%
Minneapolis-St Paul, MN 6.10%
New York, NY 6.80%
Orlando, FL 6.50%
Philadelphia, PA 6.60%
Phoenix, AZ 3.70%
Pittsburgh, PA 4.60%
Portland, OR 2.70%
Riverside, CA 1.70%
Sacramento, CA 4.90%
San Antonio, TX 2.70%
San Diego, CA 4.70%
San Francisco, CA 7.50%
San Jose, CA 11.80%
Seattle, WA 7.10%
St. Louis, MO 4.90%
Tampa, FL 7.50%
United States 6.60%
Washington, DC 3.80%

* Note: This home-price appreciation forecast was issued in August 2018. So the percentages shown in the right-hand column represent the company’s forecast for the next 12 months ending in August 2019.

For the most part, Zillow’s economists see house values rising over the coming months. And these 35 metro-area markets give us a pretty good indication of what their outlook is for the nation as a whole. While the amount of projected appreciation varies widely, the overall forecast is that prices will keep climbing into 2019.

Interesting Highlights from This Report

  • The Los Angeles metro area (including Long Beach and Anaheim) received the biggest home-price forecast in this particular report, followed by San Jose. These and other California housing markets are currently experiencing a shortage of inventory relative to demand, which is putting a lot of upward pressure on house values.
  • Out of the 35 metro areas on this list, Indianapolis was the only one with a negative home-price forecast. The company’s analysts expect to see a slight decline in the median home value for that market.
  • Detroit, Michigan also got a strong forecast for house prices. Detroit was hit hard by the recession and suffered a long period of economic decline ending in bankruptcy. Today, however, new efforts are underway to renovate and revitalize neighborhoods, and demand from home buyers is pushing prices north.

Price Reductions More Common in Some Markets

The forecasts shown in the table above were part of a broader report that looked at price cuts in real estate markets across the country.

According to Zillow senior economist Aaron Terrazas, housing markets nationwide are showing early signs of a shift. For the past few years, most markets have favored sellers over buyers due to tight supply and strong demand. But that may be changing, and price cuts are one sign of this shift.

As Terrazas pointed out:

“A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price-points and primarily in markets that have seen outsized price gains in recent years. It’s far too soon to call this a buyer’s market, home values are still expected to appreciate at double their historic rate over the next 12 months, but the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend.”

Related: A “normal” forecast for house values

The take-home message: Industry forecasts suggest that home prices in most U.S. cities will continue rising through the rest of 2018 and into 2019. But price growth has slowed down, and some real estate markets are shifting away from the classic seller’s market and into more “neutral” territory.

Disclaimer: This article includes numerous predictions and forecasts for home prices across the U.S. Those projections were provided by third-party sources not associated with our company, and were presented here as an educational service to our readers. As a general rule, the Home Buying Institute makes no claims or assertions about future economic conditions.

Mortgage Rate Forecasts for 2019 Predict Only a Slight Increase

A new round of mortgage rate forecasts for 2019 suggest that the average rate for a 30-year fixed home loan could hover within the 4.6% to 4.7% range next year. That’s only slightly higher than where we are right now, as of late summer 2018.

New Mortgage Rate Forecasts for 2019

Over the last month or so, three prominent housing organizations issued mortgage rate forecasts that look ahead into 2019. The groups included Freddie Mac and Fannie Mae — the two government-sponsored enterprises that buy loans from lenders — as well as the National Association of Home Builders (NAHB).

While their mortgage rate forecasts for 2019 varied slightly, it appears that all three groups expect to see some stability in terms of rate movements. Analysts with Fannie Mae and the NAHB don’t expect average rates to rise very much at all over the coming months. Freddie Mac’s team sees them rising gradually over the next year or so.

Did you know: There are many different types of home loans. But long-range forecasts are usually issued for the conventional 30-year fixed-rate mortgage, in particular. That’s because it is the most popular loan type among borrowers, by far.

Here’s a look at those three mortgage rate forecasts for 2019:

  • Fannie Mae’s latest forecast was published in July 2018. They predict that the average rate for a 30-year fixed mortgage will start 2019 at around 4.6% and stay within that range for much of the year.
  • The National Association of Home Builders also issued an updated forecast in July 2018. In it, they predicted that 30-year mortgage loan rates would average 4.71% in 2019. That’s basically in line with Fannie’s long-range outlook.
  • Freddie Mac’s new forecast, also published in July, calls for gradually rising rates over the next year or so. Their quarterly outlook predicted that 30-year loan rates would average 5.0% during the first quarter of 2019 and rise slightly throughout that year.

In July, Freddie Mac’s Economic and Housing Research Group issued the following statement:

“The 30-year fixed mortgage rate has been slightly declining since mid-June and was 4.53 percent in the second week of July. Rates have stepped back because of declining long-term Treasury yields, which continue to be pushed down by anxieties from a potential trade war. Our forecast has the 30-year fixed-rate mortgage averaging 4.6 percent this year, and rising to 5.1 percent next year.”

General Consensus: Big Jump in Rates Appears Unlikely

Granted, these are just forecasts. They are an educated guess based on current trends within the housing market, Wall Street, and the broader economy. So there’s a chance they could become inaccurate over time.

In fact, we’ve seen some inaccurate predictions in the past. At the end of 2016, some of these same groups were predicting that rates would rise steadily throughout 2017. But they actually dropped during the first half of that year and then hovered within a narrow range.

It’s the general consensus here that’s more noteworthy. And the consensus outlook seems to be that mortgage rates will remain relatively stable through the latter part of 2018 and into 2019. These analysts don’t expect to see a big jump in rates, or at least not a sustained hike.

Home Prices Still Rising in Most Cities

Based on these mortgage forecasts, home buyers might not need to worry about a big jump in mortgage rates any time soon. But rising home values are a very real concern.

House values in most U.S. cities are expected to rise gradually throughout 2019. This could reduce affordability and buying power for many people. So postponing a home purchase could mean that you’ll end up paying more.

In mid-August 2018, the real estate information company Zillow wrote the following:

“The median home value in the United States is $217,300. United States home values have gone up 8.3% over the past year and Zillow predicts they will rise 6.6% within the next year.”

Disclaimers: This article includes mortgage rate forecasts and housing predictions issued by third parties not associated with our company. We have presented them here as a service to our readers. As a general policy, the Home Buying Institute does not make projections or assertions about future housing trends.

San Jose Housing Forecast: Above-Average Price Growth into 2019

Neighborhood in San Jose
Housing development in San Jose, CA. Photo by Sean O’Flaherty.

A pair of recent forecasts for the San Jose, California real estate market suggest that the city will continue to experience above-average price growth in 2019. In fact, one forecast predicted that it will be one of the five strongest housing markets in the country, in terms of annual home-price growth.

Strong Forecasts for the San Jose Real Estate Market

At first glance, the San Jose real estate scene seems to defy all reason. We’re talking about a housing market where a quaint but unremarkable ranch-style house with a modest 1,100 square feet recently sold for $1.2 million dollars, after receiving a slew of offers from buyers.

The median home value in San Jose was around $1.1 million as of June 2018, according to Zillow. Most of the properties in this area are now worth more than the peaks reached during the last housing boom. (And how did that turn out again?)

You might think that a real estate market as expensive as San Jose, California might be “topping out” soon, and that home prices would begin to level off in the near future. Think again.

Two recent forecasts for the San Jose real estate market suggest that the city will see some of the biggest home-price gains of any city in the country, between now and summer 2019.

Let’s start with a forecast published by Veros Real Estate Solutions in July 2018. The Santa Ana-based property valuation company analyzed real estate conditions in major metropolitan areas across the country. They then singled out those they felt would experience the highest levels of home-price appreciation between June 2018 and June 2019.

Here are the top five metros for projected price growth during that 12-month period:

  • Seattle-Tacoma-Bellevue, Washington (+11.1%)
  • Olympia, Washington (+9.8%)
  • Bremerton-Silverdale, Washington (+9.8%)
  • San Jose-Sunnyvale-Santa Clara, CA (+9.5%)
  • Carson City, NV (+9.5%)

According to Eric Fox, VP of Statistical and Economic Modeling at Veros:

“The San Jose market remains exceedingly strong with a supply of homes at an extremely low 1.0 months, while its population is continuing to grow steadily. Its unemployment [rate] is an extremely low 2.6%. The Silicon Valley continues to attract workers for high tech jobs, and there isn’t enough housing to fill demand, making this one of the strongest markets in the country.”

The company’s strong forecast for the San Jose housing market is noteworthy by itself. It’s even more mind-blowing when you consider how much home prices in the area have already risen, over the last few years.

According to Zillow, the median home value for San Jose, California rose by a staggering 24% over the last 12 months (as of July 2018). Nationwide, house prices rose by about 7% to 8% during that same one-year period. So we’re talking about a real estate market that has appreciated more than three times the national rate.

And the economists at Zillow recently predicted that prices would climb by another 10% or so over the next year. Chalk up another strong forecast for the San Jose real estate market.

A Seriously Lopsided Supply-and-Demand Situation

This is a supply-and-demand story, and a lopsided one at that.

The supply of homes for sale is chronically low in the San Jose area, and across most of Silicon Valley. In fact, he real estate market in San Jose has had about a one-month supply of homes for sale during the summer of 2018. That’s one of the lowest levels we’ve seen outside of Seattle, and well below what is considered to be a “balanced” real estate market.

And with a strong local economy and plenty of jobs, San Jose will continue to attract new residents, many of whom can actually afford to buy a house in this pricey market. So we have a situation where there is very limited supply and strong demand. This is putting upward pressure on home prices, more so than in most housing markets across the country.

Disclaimer: This article contains predictions and forecasts for the San Jose, California housing market through 2018 and into 2019. These projections and outlooks were provided by third parties not associated with our company. The publishers of this website make no claims or assertions about future economic conditions.

Charlotte Housing Forecast Suggests Slower Price Growth Through 2019

Charlotte, NC aerial photo

A recently published forecast for the Charlotte, North Carolina housing market indicates that home prices could rise more slowly over the coming months than they did over the past year. But competition among buyers remains high due to limited inventory.

Updated Forecast for the Charlotte Real Estate Market

In July 2018 the real estate research team at Zillow predicted that the median home value for Charlotte, North Carolina would rise by 3.2% over the next 12 months. This followed an actual recorded gain of 12.5% over the previous 12 months.

So clearly they expect price growth to slow down through the end of 2018 and into 2019. In this way, Charlotte mirrors many other cities across the country. The general consensus appears to be that price growth will slow down through the second half of 2018 and into 2019, in most cities across the U.S.

Related: A ‘normal’ forecast for home prices

As of June 2018, the median sales price for Charlotte was $243,250, based on data provided by Trulia. The local Realtor association reported similar numbers for June 2018, which also indicated a rising trend. According to the Charlotte Regional Realtor® Association, the median sales price rose 2.8% in June compared to the same month a year earlier, landing at $248,045. This is based on data from the Carolina Multiple Listing Service.

Zillow’s economists also labeled the Charlotte housing market as “very hot,” which means there is a lot of competition among buyers. The current supply-and-demand situation within the local real estate scene makes it more of a seller’s market.

Limited Inventory Driving Competition Among Buyers

So the forecast for Charlotte’s housing market calls for continued home-price gains for the foreseeable future. And inventory has a lot to do with these predictions.

Among the major cities in North Carolina, Charlotte is one of the tightest real estate markets in terms of for-sale inventory. In May 2018, the city had about a 2.2-month supply of homes for sale. In theory, this means it would take 2.2 months to sell off all homes currently for sale if no new inventory came onto the market.

A balanced real estate market has somewhere between 4 to 6 months of supply. So the real estate scene in Charlotte still favors sellers or buyers.

In these constrained inventory conditions, sellers tend to have more market leverage. Buyers, on the other hand, often have to compete fiercely for limited inventory. And all of this puts upward pressure on home prices, which is why the median home value has climbed so much over the last year.

Strong Job Market Boosting Demand for Homes

According to the U.S. Department of Labor, the unemployment rate in Charlotte sank to 3.4% in May 2018. That indicates a strong local job market and a robust economy. The city’s unemployment rate is slightly lower than the statewide average for North Carolina.

A strong job market affects the housing market in Charlotte in a couple of ways:

  • First of all, it attracts new residents who are seeking employment. This contributes to population growth, which in turn can boost demand for housing in both the rental and purchase side.
  • A good job market also puts more people into a position where they can afford to buy a home. After all, employment is one of the first things mortgage lenders look at when reviewing loan applications.

Given the current supply and demand situation in the area, it’s not surprising to see a housing market forecast that calls for additional price gains. But homeowners probably shouldn’t expect to see double-digit gains in 2019, as they did over the last year or so. Price growth in this real estate market is predicted to slow down over the coming months.

Disclaimer: This report includes predictions and forecasts relating to the Charlotte, North Carolina real estate market in 2018 and 2019. These forward-looking statements were offered by third parties not associated with our company. The Home Buying Institute makes no claims or assertions regarding future economic and housing trends.

Outlook: What Will the U.S. Real Estate Market Do in 2019?

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.

Update: mortgage trends to watch in 2019

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.

A ‘Normal’ Forecast for U.S. Home Prices Through Spring 2019

A team of housing analysts and economists have offered a U.S. home-price forecast extending into spring 2019 that’s fairly “normal” by historical standards. This follows several years of above-average price growth within the nation’s housing market.

U.S. Home Price Forecasts Through Spring 2019

Home values across the country have been rising steadily for the last few years. In many cities and towns, this is the result of limited inventory and strong demand. Prices have risen at an above-average pace for the last couple of years, according to numerous sources.

In May 2018, the real estate information company Zillow reported that the median home value for the nation as a whole rose by 8% over the previous 12 months. Those are above-average gains, when you look at annual appreciation over the last few decades. Historically, home prices in the U.S. have risen by around 5% annually.

Some cities experienced double-digit price growth during 2017, as well as the year before. For instance, prices in Atlanta, Georgia rose by 12.4% over the last year, according to Zillow. In Seattle, the median home value climbed by a whopping 17% during that same period. Those are extreme cases of annual price growth. We’ve seen similar “abnormal” trends in many other cities across America.

And that brings us to the latest home-price forecasts for the U.S. Recent predictions suggest that year-over-year appreciation might be slowing to a more “normal” pace.

Economists from Zillow, for example, recently offered a forecast for 4.2% growth over the next 12 months or so. This outlook was issued in May 2018 and therefore extends into the spring of 2019.

According to the company’s website: “United States home values have gone up 8.0% over the past year and Zillow predicts they will rise 4.2% within the next year.” (Quote obtained on May 17, 2018)

The nationwide median price was up to $213,000 as of May 2018.

An Unbalanced Supply-and-Demand Situation

While the latest round of U.S. home-price forecasts suggests that there is some normalizing within the housing market, the inventory situation remains abnormal. In many cities across the country, real estate markets are experiencing an unusually low level of supply right now.

In such markets (and there are a lot of them), there just aren’t enough homes listed for sale to meet the demand from buyers. This is putting upward pressure on prices, and it’s partly why house values have risen so much over the last couple of years.

According to economists and housing analysts, a “balanced” and healthy real estate market has somewhere between five and six months of supply. This means it would take five to six months to sell off all properties currently listed for sale, if no new ones came onto the market in the meantime — theoretically speaking.

As of spring 2018, most cities across the U.S. had less than a five-month supply of homes for sale. Some cities are well below that level. Some of the tightest markets — like Seattle, Sacramento and Denver — had less than a two-monthly supply of homes for sale, as of April 2018.

This is partly why the latest U.S. home-price forecasts, extending into 2019, are calling for additional gains over the coming months. Short supply and steady demand are putting upward pressure on home prices, and these conditions could carry over into 2019 for many U.S. cities.

Still, it’s good to see some home-price forecasts calling for somewhat normal growth over the next year. House prices need to cool down a bit, for the sake of long-term sustainability and affordability.

Disclaimer: This article includes trends, predictions and forecasts relating to house values in the U.S. These forward-looking statements were provided by third parties not associated with our company. As a general rule, the Home Buying Institute makes no claims or assertions about future conditions with the real estate market or broader economy.