If you’re looking into investing in a new property in 2019, arming yourself with knowledge about what’s going on in the housing industry can help you know what to expect, as well as knowing what the market looks like right now. I’ve summarized a few of the main issues and projections for the year to take into consideration while you’re shopping for a home.

Rates

2018 wasn’t a great year for buyers. The lack of housing inventory drove up prices and interest rates increased four times over the course of the year. This year the pace of interest rate hikes should slow down with the Federal Reserve rumored to only raise rates twice in 2019.

Historically, current interest rates aren’t high. In the early 80s, we saw rates as high as 18%.

Housing Inventory

Housing inventory will improve a little in 2019, but not much from last year. After the recession, with so many new houses left unoccupied and the demand low, builders scaled back on construction. This has kept the demand high and new construction options low.

Another major contributor to the lack of new construction is that building costs have doubled in the past decade. On top of that, builders have been experiencing a lack of skilled and unskilled labor due to a decrease in trade-school enrollment and stricter immigration laws, which causes a slow-down in the construction process. To compensate, builders have focused on higher-end homes with bigger profit margins.

Eased Standards

Speaking of the recession, as we get further away from it, lending standards are beginning to ease which translates to reduced documentation requirements, lower credit scores and smaller down payment options. Some say lending institutions overcorrected too much with their regulations after the recession, so this is a good thing. This gives everyone a little more breathing room, especially in this rising rate environment.

So, to put all these pieces together: due to a shortage in labor and rising construction costs, less affordable housing is being built, which leads to a tighter housing inventory, and higher prices and interest rates. However, eased lending requirements and qualifications are making it a bit easier to secure a home loan. All in all, projections for 2019 aren’t terrible. I’d take that as a good thing.

Housing Market Forecast for 2019