2018 was a competitive year for the residential real estate market both nationally and locally, as median values of residential real estate rose throughout the year and inventory remained relatively low. With increasing mortgage rates, real estate values and low inventory, it was a seller’s market, with many buyers getting priced out of the market, especially first-time buyers.
In the post below, I’ll review what I expect in the 2019 residential real estate market for buyers, sellers and the local Atlanta market. I believe there will be some economic uncertainty that will affect the market, because of this, it is even more important to know where the opportunities are in the Atlanta market as well as how the opportunities should be valued.
So what’s in store for 2019?
Last year was an extremely competitive one for buyers, who were paying premiums in bidding wars for properties. I expect this trend to continue in 2019 but the competition over properties will cool. Rising interest rates and prices will ease the competition, giving slight favor back to buyers. However, the rising rates will test buyers mortgage budgets.
According to Zillow research, 30 yr fixed rate mortgages are forecasted to rise to 5.8% which will affect budgets by increasing monthly mortgage payments. This increase could price many first time buyers out of the market, thus reducing buying competition. Likewise, Zillow predicts that while home value growth will continue, it’s expected to cool from its highs, which will be favorable for buyers. All that said, I still expect inventory levels to remain flat to slightly up, holding back a buyer’s market.
Sellers will maintain the advantage in 2019, however, they will also feel the effects of rising mortgage rates as there will be fewer buyers competing for their properties. So in 2019 sellers will lose some control of the buying process and adjust their price expectations accordingly.
Nevertheless, I believe that the influx of millennials entering the market will help support current values, maintaining the seller advantage. According to Danielle Hale, Cheif Economist for Realtor.com, millennials will make up the largest segment of buyers next year, accounting for 45% of mortgages. And according to a survey from Trulia, 21% of Americans ages 18-34 plan to buy a home within the next 12 months.
As I noted in my previous post, Atlanta had been more resilient than the rest of the market, but in November, the South region and Atlanta started to see some of the slow down that the national market experienced in the fourth quarter. Showing traffic was down 5% in November, indicating that many buyers are getting priced out of the market or they’re on the sidelines waiting to see how mortgage rates move. According to a Redfin analysis, Atlanta sellers have been dropping prices at a higher rate than other major markets in order to attract more buyers.
I expect this pattern to trickle into 2019, similar to the national market, although the impact will be less in Atlanta due to more inventory coming available as developments are completed. It will still be a seller’s market in Atlanta but the competition will slow impacting sales and price growth. In 2019, according to Realtor.com, sales in Atlanta are expected to be down 1.9% and prices are only expected to grow a modest 3%.
Overall I believe homeownership will continue to rise, but at much slower rates than we’ve seen over the past several years. Home values will increase at a slower rate and inventory levels will slowly rise. Nevertheless, there will be a lot of uncertainty in the market and values will still be difficult to find. If you are planning on buying or selling a property it will be more important than ever to enlist an expert to help you navigate the best opportunities in 2019.