Although several housing market experts anticipate the market slowing down in 2019, LendingTree believes that there is no cause for alarm.
In its 2019 forecast, LendingTree predicts slower sales will give rise to an increase of inventory, which could benefit lenders and homeowners.
“The medium- and long-term prospects for housing are good because demographics are going to continue to support demand,” LendingTree Chief Economist Tendayi Kapfidze writes. “With a slower price appreciation, incomes have a chance to catch up. With slower sales, inventory has an opportunity to normalize. A slowdown in 2019 creates a healthier housing market going forward.”
This should be welcomed news to a market that is already grappling with concerns of affordability and inventory.
That being said, the company indicates that mortgage interest rates are likely to rise than fall, potentially increasing to more than 5%. LendingTree attributes this fluctuation to income growth.
“The slowdown in both sales and prices are a direct result of the increasing cost of leverage for the marginal homebuyer,” LendingTree writes. “Over the past month, rates are down 50 bps, in part because of concerns about growth. This illustrates the uncertainty of the rate outlook. Our expectation is that rates are more likely to increase than decrease, as growth is above trend and wages are rising. Mortgage rates could rise to 5.5%.”
Notably, LendingTree claims home price growth will also moderate, reaching about 3% year over year.
“There may be some localized price declines, particularly in cities where affordability has become a challenge, but we don’t expect a national decline,” LendingTree states.
However, the company states economic headwinds could have an impact on consumers, therefore weakening their confidence in the market.
“After the tax cut induced strength in 2018, with growth the fastest since the financial crisis, the economy will slow in 2019,” Kapfidze said. “Adding to the challenges the loss of stimulus will bring, political concerns will continue to be a source of uncertainty and volatility, which could cause a loss of confidence that suppresses both business and consumer spending.”
Nonetheless, LendingTree said it does not anticipate the economy will be driven into a recession in 2019, believing the nation’s strong labor market will form the basis for growth.
