Indicators that 2019 will be a Hot Market

Most experts agree that 2018 has been a great year for sellers. Lower inventory of existing homes for sale, coupled with slowed rates of new construction, created competition that resulted in a large percentage of sales above asking price. Now that we’ve reached the end of the year, we turn our focus to what 2019 will look like.

With the housing market crash of 2007-2008 still fresh in their minds, some wonder if these high prices and low sales are indicators that another bubble is imminent. However, there are other factors, such as rising interest rates, record-high lumber prices, and more stringent lending rules, that may better explain the 2018 market.

This framework provides a different outlook on the coming year; in fact, there are reasons to believe that 2019 will be a hot market, and wage growth will serve as the catalyst. Rising wages should increase demand at all price points, rather than relying on price decreases to make homes affordable to more buyers.

So, how do you prepare for growth in 2019? Three indicators to watch over the next few months are existing home sales, housing units authorized but not yet started, and real disposable personal income.

  • Existing home sales are currently the weakest of the three indicators, as sales were down in 2018. However, if wages continue to grow, experts think existing home sales will be stronger a year from now.

  • Housing units authorized but not yet started - of which there are almost 170,000 - are a strong indicator right now, as limited inventory has led to higher price points. Once these homes are built and hit the market, sales should be spurred by the growth of inventory.

  • With affordability playing a critical role in the current climate, real disposable personal income has become a real estate industry indicator. Rising wages would boost new home sales as well as new home construction.

The key for the industry in 2019 will be wages. Whether or not the housing supply grows, is the consumer is in a place to actually afford a new home? Industry professionals must focus on whether or not the consumer is employed and if their wages are growing, which would render homes affordable even in the face of other counteracting factors.