In 2018, the housing market experienced its fair share of up and downs, attributed to many factors, including affordability and inventory concerns. But as the year comes to an end, homebuyers will be walking into 2019 with more pep in their step.
Last week, amid U.S. stock market volatility, mortgage rates finally edged down. In fact, Freddie Mac revealed mortgage rates retreated to 4.75%, according to its Primary Mortgage Market Survey.
Todd Probasco, Lakeside Bank’s vice president mortgage sales manager, said this retreat will be impactful.
“Interest rates hit 5% a month ago and rates have been going up for the last year, so that reduction is a big move in the market,” he said.
Probasco is not wrong. Throughout 2018, both pending and home sales have fallen month over month.
Furthermore, homebuilder confidence continued to decline as interest rates proved to be a deterrence for many prospective homebuyers.
“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” National Association of Home Builders Chairman Randy Noel said.
Despite these industry headwinds, Probasco said the recent decline in rates will create a competitive and attractive landscape for homebuyers.
Interestingly, Redfin reported that mortgage rates have driven migration from expensive coastal cities, increasing competition in affordable inland markets.
Probasco notes that going into the new year, housing market trends are likely to reflect similarities from 2018.
“For 2019, I expect to see a lot of similarities from 2018 into 2019,” Probasco said. “The majority of transactions in 2019 will be purchase, although there will still be some refinance.”
Interestingly, Probasco said there will also be an uptick in both home renovations and home equity lines of credit.
It’s worth noting that NerdWallet’s latest Home Improvement Report revealed that from 2015 through 2017, Americans spent $449.5 billion on home renovation projects. This number is likely to increase in the upcoming year as well.
“Mortgage rates have been rising for two years and lots of homeowners are locked into low rates they don’t want to give up by selling their current home, so they’re fixing up instead of moving up,” NerdWallet mortgage expert Holden Lewis said.
Overall, Probasco said going into 2019, homebuyers are likely to see slight increases in mortgage rates, but the current landscape of the housing market is favorable for homebuyers looking for a home.
