Price reduced sign

Hot Housing Markets Like Denver, San Jose and Seattle Are Cooling

Price reduced sign

A recent report showed that some of the nation’s hottest housing markets are beginning to slow down. Slower home sales have been reported in housing markets like Denver, Oakland, Seattle and San Jose.

But despite this trend, the latest real estate forecasts suggest that home prices in most of these “cooling” markets will continue to climb in 2019.

Hot Housing Markets Are Slowing Down

Is a cooling trend coming to the U.S. real estate market? In some cities and metro areas, the answer appears to be yes. In fact, cooling trends are being reported for some of the nation’s hottest housing markets, like Denver, San Jose and Seattle.

According to a recent report published by Redfin, a nationwide real estate brokerage, the markets with the fastest home sales during the spring of 2018 are now experiencing a significant slowdown.

The company based its analysis on the speed at which homes sell within a particular area. In some of the hottest and fastest-moving real estate markets (like Seattle and San Jose), the average number of days on market has dropped considerably. This suggests a softening of demand in those areas.

To quote the report:

“…this spring [2018] there were fourteen metro areas around the country where half or more of the homes that were listed for sale between March 5 and April 29 went under contract within two weeks. By mid-September, every single market saw its share of homes selling that quickly fall to below 50 percent, with spring’s fastest markets, namely Seattle and San Jose, California, seeing the largest declines, falling by more than 35 percentage points since spring and over 20 percentage points from a year earlier.”

In other words, homes are staying on the market longer in these and other hot housing markets across the country.

And that’s not surprising, when you consider how much home prices have risen in those areas. In San Jose, for example, the median home value rose by a whopping 19% over the past year according to Zillow. Denver and Seattle (also cited in this report) have also experienced steady price growth over the past few years — though nothing like San Jose.

So perhaps these markets are “topping out” in terms of affordability. It’s a cycle we’ve seen many times in the past. When prices rise to the point that the average resident cannot afford to buy a median-priced home, it leads to a weakening of demand. This in turn takes some of the steam out of home-price appreciation.

Sellers Dropping Their Asking Prices

Price reductions are also becoming more common in the nation’s hottest housing markets, like Denver, Seattle and San Jose. Sellers in these and other areas are realizing there’s not the same level of demand as there was in 2016 or 2017. Homes are staying on the market longer.

“As a result, sellers are having to wait longer for offers, and more sellers are dropping their list price to attract buyers,” said Daryl Fairweather, Redfin’s chief economist.

The table below includes some of the hottest real estate markets in the U.S. For each metro area, it shows the percentage of homes that went “off market” or under contract in two week or less. By comparing the August-to-September columns for 2017 and 2018, we can see which markets appear to be slowing down. These include Seattle, San Jose, Portland, Oakland and (to a lesser extent) Denver.

Percent of Homes that Went Off Market in Two Weeks or Less
Metro Area Aug. 14 –
Sept. 10, 2017
Mar. 5 – Apr. 29,
2018
Aug. 13 –
Sept. 9, 2018
Warren, MI 37% 51% 35%
Tacoma, WA 41% 61% 39%
Seattle, WA 56% 72% 35%
San Jose, CA 58% 66% 31%
San Francisco, CA 45% 54% 40%
Sacramento, CA 38% 50% 32%
Portland, OR 42% 52% 33%
Omaha, NE 42% 59% 47%
Oakland, CA 50% 61% 38%
Grand Rapids, MI 41% 58% 44%
Denver, CO 47% 62% 41%
Cambridge, MA 49% 60% 44%
Boston, MA 39% 52% 38%
Boise, ID 27% 52% 36%

We can also discern from this table that the “cooling” trend is not happening in all of the hot real estate markets. In fact, the percentage of homes that went under contract in two weeks or less actually rose in some metros, from 2017 to 2018. Boise, Omaha and Grand Rapids all fall into that category.

According to Redfin:

“The common factor among the metro areas that are not slowing down: they’re all smaller cities away from the coasts where homes are much more affordable.”

What conclusions can we draw from this? Among other things, these trends suggest that a lack of affordability is possibly the biggest factor that is causing the nation’s previously red-hot markets to cool down.

Related: Forecasts for 35 largest U.S. metros

Forecast: Home Prices Expected to Keep Rising

Despite the slowing sales cited above, hot housing markets like Seattle, San Jose and Denver still tend to favor sellers over buyers. Strong demand and limited inventory will keep these markets highly competitive for the foreseeable future.

The latest forecasts suggest that these metro areas could see smaller home-price gains in 2019, compared to the past couple of years. But prices are expected to continue rising in San Jose, Denver, and nearly every other city in the table above.

The bottom line to all of this: While some of the nation’s hottest housing markets are cooling, they clearly haven’t gone “cold.” Home sales might be slowing, and price growth might be happening at a slower pace than in previous years. But these markets are still very competitive for home buyers.

Hilly San Francisco

California Housing Forecast for 2019: Rising Prices and a ‘Weaker’ Market

On October 11, the California Association of REALTORS® (C.A.R.) published its 2019 California Housing Market Forecast. Among other things, the industry group predicts that rising home prices and reduced affordability will lead to a slower, weaker housing market in 2019.

California Housing Market Forecast for 2019

Affordability has become a big problem in many real estate markets across the state of California. This is especially true within the San Francisco Bay Area, where a typical resident with average income can scarcely afford to own a home. These issues have also arisen in some of the large coastal cities like San Diego and Los Angeles.

According to the C.A.R. forecast for the California housing market in 2019, these trends could result in weaker demand and fewer home sales next year.

“A combination of high home prices and eroding affordability is expected to cut into housing demand and contribute to a weaker housing market in 2019, and 2018 home sales will register lower for the first time in four years,” the group stated.

They expect to see a modest decline in the sale of existing single-family homes next year, along with a general cooling trend for prices. According to C.A.R. president Steve White: “While home prices are predicted to temper next year, interest rates will likely rise and compound housing affordability issues.”

During 2017, the median home price for the state of California rose by 7.2% year over year. During 2018, it is expected to rise by around 7%. But looking forward, into 2019, C.A.R. predicts that the median home value will rise by just 3.1%.

Of course, real estate conditions can vary widely from one city to another. Most of their 2019 housing market forecast pertains to California as a whole. But when you drill down to the city and metropolitan level, there’s quite a bit of variance.

For example, in the tech-driven city of San Jose, home prices are expected to rise by much more than the 3.1% figure projected for the state as a whole. The economic research team at Zillow recently predicted that the median home value in San Jose would rise by nearly 14% over the next 12 months (through October 2019). That bold forecast is largely due to strong demand and tight inventory conditions in San Jose.

Statewide, however, the C.A.R. forecast predicts slower home-price growth during 2019 compared to this year and last.

Rising Mortgage Rates, Home Prices Could Reduce Affordability

The state’s Realtor association also predicted a slight rise in mortgage rates for 2019. They anticipate that the average rate for a 30-year fixed home loan will rise to 5.2% in 2019, compared to an average of 4.7% in 2018. This long-range outlook closely resembles forecasts issued recently by both Freddie Mac and the Mortgage Bankers Association (more).

Granted, that’s not a huge increase in lending rates. But when you add in the prospect of additional home-price gains, it could definitely reduce affordability for a lot of would-be buyers. This is partly why the C.A.R. forecast for California’s housing market predicts fewer home sales in 2019. With steadily rising costs, fewer and fewer people will be able to afford a home purchase.

According to the report: “The California median home price is forecast to increase 3.1 percent to $593,450 in 2019, following a projected 7.0 percent increase in 2018 to $575,800.”

Disclaimer: This article includes forecasts and predictions for the California real estate market in 2019. Those projections were made by third parties not associated with the Home Buying Institute. As a general rule, HBI makes no claims or predictions about future housing conditions.

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.

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.

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.

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.

Forecast: Grand Rapids Housing Market Experiencing Inventory ‘Crisis’

Summary: Inventory is still lacking within the Grand Rapids, Michigan real estate market, and forecasts suggest that this will boost home prices through 2018 and into 2019.

In 2017, a real estate report published by Realtor.com singled out Grand Rapids as having one of the tightest housing markets in the country. Back then, the city had one of the lowest inventory levels of homes for sale.

According to the January 2017 report: “Since late 2010, the city has experienced net in-migration for the first time in a decade, creating way more housing demand. Twice in 2016, Grand Rapids even made it onto our monthly list of hottest markets.”

Well, here were are in spring of 2018, and not much has changed. The Grand Rapids real estate market still has inventory levels that are well below what is considered to be normal. So it’s no surprise that economists are issuing housing forecasts calling for additional price growth in this market.

A Lot of Demand, Not Enough Supply

Housing analysts and economists say that a “balanced” real estate market has around five to six months worth of supply. In theory, that’s how long it would take to sell off all of the housing stock currently listed for sale, if no new properties came onto the market in the interim. This metric gives us better insight into local real estate conditions in cities across country.

According to the latest MLS data and real estate reports, Grand Rapids, Michigan had about a 0.9-month supply of homes for sale as of March 2018. You read that right. The city had less than a one-month supply of homes earlier this year. (You’ll recall that a supply of five to six months is considered normal and balanced.) So clearly we are talking about a very constrained real estate market with limited inventory.

By comparison, Lansing and Detroit both had more than a three-month supply of homes for sale during that same month. The nation as a whole was slightly below the three-month mark in March of this year.

Forecast for Grand Rapids Housing Market: Price Growth

Given these tight inventory conditions, it’s no surprise to see Grand Rapids housing market forecasts that call for rising prices through 2018 and into 2019.

Zillow is just one of several sources that have issued positive predictions for the city. As of May 2, 2018, the company was reporting a median home value of $181,447 for the Grand Rapids real estate market. That was an increase of 10.2% over the same month a year earlier. Looking forward, Zillow’s economists forecast that the median home value in the area will rise by 4.9% over the next 12 months or so.

In April 2018 Ryan Ogle, president of the Greater Regional Alliance of Realtors, told Michigan Radio that the Grand Rapids housing market is experiencing an “inventory crisis” — his words. He said that local real estate professionals are also referring to it as a “logjam.”

There are more buyers than sellers, which makes the market very competitive for those seeking a home. And those homeowners who are thinking about selling often won’t even list their homes until they can find somewhere else to live. And so the cycle perpetuates itself.

While there is ongoing construction within the local housing market, it’s currently not enough to correct the supply-and-demand imbalance. When asked how long it might take for the this market to “balance out,” Ogle told Michigan Radio that it could be two years or more, due to the lengthy nature of the home-building process.

Disclaimers: This article contains predictions for the Grand Rapids, Michigan real estate market through 2018 and into 2019. Projections, data and commentary were provided by third parties not associated with the Home Buying Institute. As a general rule, we make no claims or assertions about future housing conditions.

Dallas Housing Forecast for 2018: Is It Getting Back to ‘Normal’?

According to a new report from Realtor.com, Dallas is currently one of the hottest housing markets in the United States. But things might cool down a bit over the coming months. Recent forecasts for the Dallas housing market, extending into the fall of 2018, suggest that home-price appreciation will slow.

Here’s a look at the latest trends, predictions and projections for the DFW real estate market, stretching into 2018.

Realtor.com: Dallas One of the 20 Hottest Markets

On September 28, 2017, Realtor.com put out its latest list of the 20 “hottest markets for real estate” in the United States. The company’s economists look at a variety of indicators relating to housing supply and demand, and then rank the 20 cities or metro areas with the hottest markets.

By their estimation, Dallas, Texas was one of the hottest housing markets in the country for September 2017, appearing at #12 on their list. It’s been on the list for several months.

House prices in Dallas have risen steadily over the last couple of years. According to the real estate information company Zillow, the median home value in Dallas rose by nearly 8% over the last 12 months alone (ending in October 2017).

According to the North Texas Real Estate Information System, the average price for a single-family home purchased in the Dallas area reached $299,731 as of August 2017. That was 7% higher than the same month a year earlier.

A Real Estate Market Forecast for 2018

A recent Zillow forecast for the Dallas real estate market suggests that prices could slow down a bit over the coming months. The company’s 12-month outlook predicts that the median home value will rise by 4.1% between now and October 2018. That would be about half of the growth from the previous 12 months, by their estimation.

To put this in perspective, “average” home price growth over the last few decades is somewhere between 3% and 5%. So perhaps what we are seeing here is a normalization within the Dallas real estate market.

The nearly 8% growth recorded over the last year or so is abnormal, as it outpaces wage and income growth. That kind of depreciation is generally not sustainable over a long period of time, because it creates affordability issues within the housing market. So a slowdown of home prices within the Dallas real estate market could be viewed as a positive trend, from an economic standpoint.

Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University, recently echoed this sentiment in comments to The Dallas Morning News. According to Dr. Gaines:

“You still got a good [real estate] market, just a little slower than what we’ve seen recently. Things are getting back to normal.”

Inventory Still Tight Across the DFW Metro Area

Here’s another prediction for the Dallas real estate market in 2018. Home buyers entering the market next year will encounter limited inventory and stiff competition from other buyers. That’s the situation right now, and those trends will probably continue in 2018.

A so-called “balanced” real estate market is said to have around five to six months worth of supply. Recent reports showed that the Dallas metro area had a 2.3-month supply of homes for sale, as of September 2017.

This is partly why prices have risen so much over the last couple of years. There are plenty of buyers in the market, but limited inventory. Home values tend to rise steadily under such conditions.

The overall supply-and-demand situation in Dallas has been relatively flat over the last few years, but inventory increased a bit during 2017. Increased construction could create a better balance between supply and demand in 2018.

So while we expect to see (continued) constrained inventory conditions in 2018, buyers might have increased options when it comes to finding a home.

Here’s the general consensus among housing analysts and economists. The Dallas real estate market is hot right now, but it could begin to cool a bit over the coming months. While home prices are expected to continue rising into 2018, the year-over-year gains will likely be smaller than in the past. Translation: things might be getting back to normal after a couple of years of overheated growth.

Disclaimer: This article includes various predictions and forecasts for the Dallas, Texas housing market through 2018. These forward-looking statements were provided by third parties not associated with our company. The Home Buying Institute makes no claims or assertions regarding future housing conditions.