A review of 2018 and a look ahead to 2019 may look a little frightening from a financial perspective, however, there are promising pieces of both the year behind us and the one ahead. Read on for thoughts on the upcoming year in the real estate and mortgage world.

Inventory Changes

The tight inventory on homes priced under $300,000 looks to continue into early 2019, but by the end of the year things should loosen up with builders completing more entry-level homes. That being said, there is still pent-up demand especially with regard to first-time homebuyers targeting the entry-level homes. 2019 is expected to shift to a more balanced market with the increase in inventory and rising home values. The situation is not dire, however, demand still continues to outpace supply and that will continue until construction is able to ramp up and keep up.

Home Affordability

The good news for current home owners is that home values are expected to continue to rise in 2019. The better news for would-be-homebuyers is that the values should not increase at the same fast pace as they did in 2018. The National Association of Realtors, NAR, predicts that values will rise 2.5% in 2019 as compared with the 4.7% rise seen in 2018. The benefit to buyers is that there should be more inventory to choose from, but the negative is that those homes will have higher price tags.

First-Time Home Buyers and New Construction

There has been a lot of focus on first-time homebuyers over the past decade, and rightfully so. The percentage of first-time homebuyers coming into the market after 2008 increased to about 60% of total buyers showing they have incredible buying power. The downside for first-time homebuyers remains a lack of inventory in the entry-level range. Again, builders are completing more homes in this range, but they still cannot keep up.

New construction of entry level homes could shake up the market in the near future. With millennials making up the bulk of first-time homebuyers, they are demanding different homes than their predecessors. Connectivity is a priority, and not just electronically. Millennials are putting the locations of their new homes above square footage and are looking for connections to the outdoors, food and social networks. They are also pushing the envelope of materials and construction. Green living and sustainable homes are becoming a popular focus of millennials and that could further impact the world of new home construction.

Mortgage Rates and Lending Standards

Mortgage rates were in the headlines quite a bit in 2018 with the 30-year fixed rates increasing about three-quarters of a percentage point. For 2019, the rate is expected to remain pretty steady. While the 2018 rate increase looked scary at the outset, the overall effects on homebuyers seemed limited. On an entry level home, for example, the rise in the monthly mortgage payment was somewhere between $75 – $100 per month. With rates remaining steady, homebuyers will continue to benefit from the near historic low rates.

Since the housing bubble burst about a decade ago, lending standards have obviously changed. Those standards are in place for a reason, however, they are starting to loosen a little. No drastic changes have been made, but there are new products on the market and certain credit score relaxations along with lower down payment requirements that are making obtaining a mortgage a little easier.

Timing is Everything

As with most things, home buying in 2019 will come down to timing. Waiting for the inventory to loosen or home values to level off may sound like a good idea, but there are never any guarantees. In fact, contrary to the NAR, Fannie Mae is predicting that home values will outpace 2018 and make home affordability an even bigger issue by the close of 2019. While these are just predictions, it may be better to err on the side of caution and act now if you are in the market for a new home.

Call Cambria Mortgage

To get started, call Cambria Mortgage at 952-942-0110 or visit CambriaMortgage.com. Our team of experts will provide personal, hometown service with sound advice and impeccable attention to detail at every step of the process.