At the end of a busy real estate year and in the middle of the holiday season, it is natural to reflect upon how our individual business have done and to position our business for calendar 2019. So, the question becomes, will 2019 look like 2018 or something a bit different? My answer is that 2019 will see a slight to moderate growth in the number of closings we do in the Mid-Atlantic region over 2018 based on a look at some of the key indicators.
The best predictor of the real estate market is the overall performance of the US economy and most of the industry analysts agree that that US economy has been the healthiest in a long time mostly attribute to the return of high paying jobs, new career opportunities, high employment, lower taxes, and hopefully soon, higher wages. The single most important factor for our real estate industry is that a stable economy and strong jobs market should increase the demand from homebuyers in 2019.
Most of us would agree that the 2018 real estate market witnessed a strong consumer demand and short inventory of homes this year, making it a seller’s market. The construction of new homes, while strong in some areas of the country, has not been uniform in all markets and 2019 is likely to continue the slow recovery of new construction meaning that there will unlikely be enough inventory of new homes in 2019 to satisfy real estate buyers.
For those of us who conduct real estate closings, are we just getting older or are the buyers really getting younger. Both I think are true. While we used to look at millennials as the “renting generation”, a strong economy and job opportunities has made the millennials more and more interested in buying. Look for 2019 to increase the millennial migration to the purchase market as they continue to benefit from the economy. An increased integration into the workforce with lasting and high paying careers will likely see the millennial of 2019 becoming more comfortable with taking out mortgages.
The last wild card is mortgage rates which most real estate professionals noticed have been steadily rising throughout the year. For much of 2017, the average rate for a 30-year fixed mortgage hovered just below 4%, then increasing steadily from the start of 2018 to a point in June of 2018 where it reached 4.57%. For those of us who have been in the industry for decades and recall the years of 16%-18% interest rates, my prediction is that notwithstanding the interest rate increases of 2018, the economy and strong job growth with continue to move consumers into the ownership market, recognizing that current and prospective increases are manageable with a strong jobs market.
So, given these factors, what is the prediction for the real estate industry in 2019? My prediction is for a stable real estate market in 2019 with a slight to moderate growth in the number of closings we will conduct in Maryland, DC and Virginia based on a strong economy and jobs growth ultimately making more and more consumer confident in joining the ranks of home ownership despite the ever-present wildcard in interest rates.
-Mark S. Lynch Esquire