What To Expect In 2019
We're entering the home stretch of 2018, when you can actually say, "See you next year!" to someone you'll see in just a few days. It's a time to look ahead, to make new plans, to achieve new dreams.
And if those dreams include buying your own home, you should keep an eye on the ever-changing tides of the housing market. Now, markets are like the weather: You can't entirely predict how they will act, but you can get a sense of the forces that will push things in one direction or another.
The economic research team analyzed a wealth of housing data to come up with a forecast of what 2019 might hold for home buyers and sellers—and it looks like both groups are going to be facing some challenges.
Millennials will still dominate home buying
Just a few years ago, millennials were the new kids on the block, just barely old enough to buy their own homes. Now they're the biggest generational group of home buyers, accounting for 45% of mortgages (compared with 17% for baby boomers and 37% for Gen Xers). Some of them are even moving on up from their starter homes.
As we mentioned above, things will be tough for those first-time buyers. But the slightly older move-up buyers will reap the benefits of both their home equity and the increased choices in the market.
And regardless of whether they're part of that younger set starting a career or the older set that's starting a family, "they’re going to be more price-conscious than any other generation," says Ali Wolf, director of economic research at Meyers Research.
That's because they typically are still carrying student debt and want to be able to spend on experiences, like travel. That takes away from the funds they can put aside for a down payment, or a monthly mortgage payment.
"They want to maintain a certain lifestyle, but they still see the value in owning a home," Wolf says.
So they might compromise on distance from an urban center, or certain amenities, or space—70% of millennial homeowners own a residence that's less than 2,000 square feet, Wolf notes.
There's plenty of time to expand those portfolios, though, as millennials' housing reign is just beginning: This group is likely to make up the largest share of home buyers for the next decade. The year 2020 is projected to be the peak for millennial home buying—the bulk of them will be age 30.
The new tax law is still a wild card
At the time of last years forcast, the GOP's proposed revision of the tax code was still being batted around Congress. While there was talk that it might discourage people from buying a home, no one really knew how it might affect the real-estate market.
This year ... well, we still don't really know. That's because most taxpayers won't be filing taxes under the new law until April 2019. And while some people might have a savvy tax adviser giving them a better idea of what's in store, for many, the reality check will come in the form of a bigger tax bill—or a bigger refund.
Renters are likely to have lower tax bills, but might not be tempted to buy while affordability remains a challenge, and with the new, increased standard deduction reducing the appeal of the homeowner's mortgage-interest deduction.
"I think the new tax plan will affect mostly homeowners and home buyers in the upper parts of the distribution," say Andrew Henson, associate professor of economics at Marquette University in Milwaukee, WI. "Those who either own or are buying higher-priced homes are going to pay a lot more."
Sellers of those pricier homes will also take a hit, as buyers anticipating bigger tax bills won't be as willing to pony up for a high list price.
The biggest change resulting from the new tax law, Hanson predicts, will be in mortgages, since people will be less inclined to take out large mortgages.
"If anyone is going to be upset about the tax plan, it'll be mortgage bankers," he says.