Like any other industry, the health of the U.S. economy and stock market at large has a direct impact on the housing market. When the economy’s doing well, it can become easier to buy, sell, or get a loan for a home. Despite stock volatility at the end of 2018, the economy’s healthy by many key indicators.
When the economy is doing well, the Federal Reserve raises the benchmark interest rate, which indirectly increases interest rates across the board. That may seem counterproductive, and the stock market can react negatively to the increases, but the idea is to keep economic growth moving forward. For those looking at buying a home, it means new mortgages will get more expensive.
After several rate hikes in 2018, officials at the Federal Reserve now appear to be easing off rate hikes—at least in the immediate future. That’s good news for buyers. Last month, the Fed predicted two rate hikes in 2019, but more recently, the Fed’s former chair Janet Yellen said the Fed may not make those hikes after all.
Late last year, the Federal Housing Finance Agency decided to raise the maximum conforming loan limits in 2019—from $453,100 up to $484,350. Those limits are even higher if you’re buying in an expensive market, but the gist is that you can now get more money without having to get a jumbo loan, which makes life easier for both you and the bank.
The easiest way to gauge nationwide housing market activity is right at your local strip mall. Stores like Home Depot and Lowe’s have become key indicators of all sorts of housing projects, since they’re popular with DIYers. When sales (and the companies’ stock prices) go up, it can mean more people are moving into homes and tweaking them to their tastes or launching remodeling projects that may increase their home’s value.
Construction stagnated in 2018, and Home Depot and Lowe’s ended the year on a lackluster financial note. But a CNN aggregation of expert opinions expects both Home Depot and Lowe’s stock to climb in 2019. That should help restore consumer confidence in the housing market as a whole.
Instead of moving into a new home and getting a new mortgage, homeowners may decide to take out a home equity loan and renovate their current home instead. Those loans are borrowed against the value of your home. For example, if you’ve paid off $100,000 on your current mortgage, you can borrow some of that money—which may be used to remodel, redecorate, or whatever else you need cash for.
With interest rates trending upward, Mark Flemming, chief economist at First American, said he expects home equity loans to become more popular. That way, homeowners won’t lose the low interest rate they currently have on their mortgage. Experts at CoreLogic agreed, pointing out that people are staying in homes longer, which means those owners are gaining significant equity in many parts of the country.
One way to measure whether it’s a buyers’ market or a sellers’ market is months of supply. This is how long it would take, at the current selling pace, to sell all of the homes on the market. Six months’ worth of supply is considered a “balanced” market. Any less than that, and sellers reap benefits like high demand and quick sales. Any more, and buyers enjoy more options and more time to negotiate.
The U.S. supply is currently sitting just below four months, and that’s good news for sellers. If you’ve been following the housing market in recent years, this one’s nothing new. But the market has recently started creeping toward balance, and analysts expect that to continue in 2019, especially in markets that have been red-hot in recent years.
2018 ended on a bad note for single-family home construction. Economists with the National Association of Home Builders (NAHB) blame the slowdown on a shortage of labor and a lack of lots to build on—in addition to governmental factors like regulations and new trade tariffs. A growing population depends on the construction of new homes, and when construction stalls (like it did toward the end of 2018), the market gets out of whack. This significantly impacts first-time homebuyers and lower-income families, whose price ranges can’t cover more lavish home purchases. NAHB expects construction stagnation to continue in 2019.
There’s also the impact of natural disasters to consider. Hurricanes and wildfires slow construction work and strain available labor. Where natural disasters strike, we can expect a construction lull to follow.
This is also bad news for home flippers. Put simply, there are less homes to flip. The outsized demand hikes prices for the homes that are available, which increases the risks of investment. Flippers and first-time buyers should keep tabs on construction activity, and single-family home construction in particular.
How are you feeling about 2019, and what trends will you be looking for? Which factors do you think will have the biggest impact on homebuyers and sellers? Share your thoughts in a comment below!
“David Honda and his team rocked!! They had great technology that took so much of the pain of home buying away. They were attentive to our specific needs and were on top of our loan process! David was always available, even when he was in Hawaii, and super responsive! Thanks David, Melissa and the team for an easy and great home buying experience.”
- Raymond F.
“I had the best experience with CSMC Mortgage. Buying a home is very stressful with all of the paperwork that has to be filled out. Faye was amazing! I have given several people her contact info, who are scared to take the step to homeownership. She took ALL of the stress away for me. I honestly, didn’t have to do much. She accommodated my crazy work schedule and help me get things done in a timely manner. She made me feel so comfortable and at ease. There were no surprises when it was time to sign and pay. I highly recommend her to anyone in need of her services and guidance. I can’t thank her enough.”
- Lisa M.
“Faye helped me purchase my first home last year. She was very professional and worked very quickly to help me procure financing. She made herself available around my schedule and took the time to explain my options for financing to help me get the lowest rate possible. Would highly recommend her to anyone looking for someone that is professional, highly knowledgeable, polite, and responsive.”
- James Z.
“With this being my first home purchase, my loan officer was very good at explaining everything to me and helping me with all my needs. Thank you for having such great people in the right place!”
- Cathleen H.
“Baret Grigorian was amazing!! From start to finish Baret was there to help in every way. I never felt like I had to call him to follow up on my loan transaction and he always kept me informed. He was able to get me great financing rates, a lower payment AND money back! Thank you Baret!! I look forward to working with you again in the future!!”
- Kenny D.
“CSMC Mortgage took great care of us and our home buying needs. Tony was more than we could have ever asked for, he went above and beyond for us and we couldn’t have been more grateful for all his hard work. CSMC Mortgage has a great and friendly staff, I would highly recommend them to anyone looking into buying a home.”
- Jannet A.
“This review is about Mark and Darci Richardson from CSMC Mortage in Simi Valley. This team is the BEST! For the past 12 years our home was "underwater" due to the "crash" in 2007, and unable to do anything with the mortgage except pay it. These two kept on top of things and finally the house qualified to REFI. We just completed everything and it closed last week... and they saved us over $900 a month!! That's a huge savings for a couple of senior citizens! We are SO happy now and finally can breathe. Thanks to Mark and Darci and CSMC Mortgage for following through, jumping through all the hoops necessary and helping us out! I can't recommend them more... they are the BEST!!!”
- Shari S.
“These folks are conscience and easy to work with. The “calm” as the “storm” of home loans rolls through! I would not use anyone else. They make sure ALL your questions are answered, be that what competitors may have offered, or ads you may have heard or seen. What a pleasure to do business with. Thank you team CSMC.”
- Michael G.