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Dona Knapp
Senior Loan Officer
Empire Home Loans
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Phone: 530-277-3662
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Realtor Report

Mixed bag for buyers and sellers forecast for 2019

It’s that time of year when people look back on the past year but also like to take a leap forward, trying to take a peek at what 2019 has in store for real estate. If your dreams include buying your own home, it’s wise to keep an eye on the ever-changing tides of the housing market.

In a recent report by the economic research team using a wealth of housing data, here what they came up with as a forecast for 2019 home buyers and sellers—a year not without its potential challenges.

There will be more homes for sale, especially in luxury markets. The persistent super-tight home inventory will get some relief, even though the surge may not be enough to keep up with the demand. According the report, the nationwide inventory actually hit its lowest level in recorded history last winter. This year, however, it finally started to recover with that expected to continue into next year, even if at a mild 7% gain.

While this is welcome news for buyers, sellers will not have it as easy. “More inventory for sellers means it’s not going to be as easy as it has been in past years—it means they will have to think about the competition," says Danielle Hale,'s chief economist. She continues, "It’s still going to be a very good market for sellers but if they’ve had their expectations set by listening to stories of how quickly their neighbor’s home sold in 2017 or in 2018, they may have to adjust their expectations.”

Pricier markets that typically have strong employment economies will see the most growth, with the biggest increases in high-end inventory in the metro areas of San Jose, CA; Seattle, WA; Worcester, MA; Boston, MA; and Nashville, TN. All of those metro markets, which may include neighboring towns, could see double-digit gains in inventory in 2019.

According to the latest California Association of Realtors (CAR) report, outmigration will also be a primary concern for the California housing market in 2019. “The high housing cost is driving Californians to leave their current county or even the state. According to C.A.R.’s 2018 State of the Housing Market/Study of Housing: Insight, Forecast, Trends (SHIFT) report, 28 percent of homebuyers moved out of the county in which they previously resided, up from 21 percent in 2017. The outmigration trend was even worse in the Bay Area, where housing was the least affordable, with 35 percent of homebuyers moving out because of affordability constraints. Southern California did not fare any better as 35 percent of homebuyers moved out of their county for the same reason, a significant jump from 21 percent in 2017.”

Much of the nation is looking for a break for homebuyers, as sellers have had it easy for the past few years, but it’s mixed bag. “In some ways, life is going to be easier for home buyers; they’ll have more options," Hale says. "But life is also going to be more difficult for home buyers, because we expect mortgage rates to continue to increase, we expect home prices to continue to increase, so the pinch that they’re feeling from affordability is going to continue to be a pain point moving into 2019.”

Millennials are the biggest generational group of home buyers, accounting for 45% of mortgages (compared with 17% for baby boomers and 37% for Gen Xers). Some are now even buying move-up homes. Slightly older move-up buyers will reap the benefits of both their home equity and the increased choices in the market.

“They’re going to be more price-conscious than any other generation," says Ali Wolf, director of economic research at Meyers Research. He cites this because millennials, who typically carry student debt, will want to be able to spend on experiences, like travel, taking 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.” Millennials are 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.

This year is truly a crapshoot for how the new tax law will affect the home buying market, as 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,” the report says, “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.”

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly lower so far today.  Last week the MBS market improved by +39bps.  This was enough to move rates lower last week. We saw mostly moderate rate volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the highest potential to impact mortgage rates this week. 1) Jobs, 2) Geopolitical and 3) Fed.

1) Jobs: We get a ton of jobs related data this week with the bond market focusing on Friday's Average Hourly Earnings data. Last month, it broke above 3.0% on a YOY basis with a 3.1% reading. The market is expecting a reading at least as strong as that. If moves higher than 3.2%, it would spark a selloff (higher rates).

2) Geopolitical: This is a TON of big global stories this week, and any one of them could easily push pricing higher or lower. The news over the weekend is the "truce" between China and the U.S. with a 90 day period of tariff freezes while the two groups negotiate a new trade deal. While Brexit is still very much in the news, it is actually France that is stealing the European headlines with massive demonstrations of 100,000 protesting rising taxes and gasoline prices. OPEC is also taking center stage as falling oil prices has been a big factor in keeping inflation at bay in the U.S. Their is an OPEC meeting on Thursday, and already we have one member, Qatar saying that it will officially leave the cartel on January 1.

3) Fed: We have a very big week that is stuffed full of speeches as we near the media blackout period before their December meeting. Fed Chair Powell was originally scheduled to speak on Wednesday, but that has been canceled due to the market being closed on Wed...we are waiting to see when it will be rescheduled for.

  • 12/03 Clarida, Quarles, Williams, Brainard, and Kaplan
  • 12/04 Williams
  • 12/05 Fed Beige Book, Powell, and Quarles

This Week's Potential Volatility: Average

Mortgage rates have a lot to chew on this week on the geopolitical front. There's a lot hanging out there that can move rates higher or lower. While we have some economic releases that can drive rates, look for markets to focus on trade, Brexit, and most of all France.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

About Dona Knapp

Dona Knapp has over 20 years of experience, which is evidenced by her extensive knowledge of the lending industry, making her a great source of information for their clients. Her commitment to excellence has earned her a reputation of customer satisfaction and building relationships that last far beyond the original transaction. Her team was strategically designed to provide superior service, uninterrupted accessibility and extraordinary products to meet all your lending needs. Don't settle for less, when you can work with the best!

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.