Everyone felt it at the start of the year—conditions leveling, the market yin and yanging. About half of Power Brokers sensed it, too—that the current cycle's ending, and a different dynamic's emerging. Now, with two months left in 2019, the consensus
is similar...but certain factors remain unclear.
"The housing market is in the midst of a normalization period, one that is characterized by slowing price growth, moderate sales and new supply that is slow to market," according to Ralph McLaughlin, deputy chief economist and executive of Research and
Insights at CoreLogic, a data provider. As the cycle turns, the correction is naturally progressing, Eli Beracha, PhD, director of Florida International University's Hollo School of Real Estate, says. “We are toward the end of the cycle—but I do not see
a collapse coming, or even a strong correction," Beracha explains.
"Price appreciation for the next 12 months is more in the 3-5 percent range," Lawrence Yun, chief economist at NAR, says. "I don't see any risk of a price decline.”
What about the price-pusher—supply? According to Census figures from September, construction fell month-over-month more than 9 percent, but still came out 1.6 percent ahead of the previous year. The ULI is predicting 850,000 single-family starts this
year, 810,000 single-family starts in 2020 and 800,000 single-family starts in 2021, compared to 875,800 last year. Across all housing types, NAR is expecting 2 percent more starts in 2019 and 10.6 percent more starts in 2020.
"Builders are steadily building more, but even a 50 percent increase from current construction activity, the market will be able to absorb," Yun says. "We need a strong ramp-up in construction, but, more likely, it will be more of a steady increase. There
will still be a housing shortage at the mid-price [tier] and lower.”
Then there's interest rates, which are currently at lows, and aren't expected to move much in 2020. In a forecast from the ULI, the 10- year Treasury rate—correlated to fixed mortgage rates—rises in 2020 and 2021, but only slightly.
"There's just no evidence that there's going to be upward pressure on rates any time soon," Johnson says. "As long as we have a positive slope to the yield curve, as long as we have a stable economy, I don't see many interest rate increases."
Beracha confirms rates "may go half a percent in either direction, but I don't see them [rising substantially] in the next year," adding "the [Federal Reserve] decreased interest rates twice in the last couple of months—I don't think we're going to see
much more of that."
Buoyed by low rates, 2020 home sales should tick up, according to Yun. As of last month, NAR forecasted 0.6 percent more home sales in 2019 and 3.4 percent more sales in 2020.
"There will be a small, incremental increase in home sales, and the reasoning for that is the magical power of low mortgage rates," Yun says. "I do believe that we will continue to have favorable mortgage rates for the next 12 months.”