Early in 2018 several real estate experts predicted a slowdown of the housing market, because of limits on mortgage interest and property tax deductions in the new tax laws.
Those items are not slowing the market though. Rather, the rise in interest rates and home prices seem to be largely causing the current lapse. Other culprits, such as global tensions over trade, along with the volatility of the stock market, and a huge government shutdown, are contributing by creating economic uncertainty. The 2013 shutdown led a housing slump. Over all, this concern makes people think twice about a home purchase. We’ll need to be further into the year to learn whether this is a temporary lull or major backing off.
Real estate experts forecasting to the end of 2019, predicted that prices and mortgage rates would moderate, continuing the slowdown but not to the point of an outright stall. Redfin predicts mortgage rates to slowly increase to 5.5%, while Zillow predicts 5.8%. Both sources forecast slowing appreciation rates, increasing only by 3.0% (Redfin) or 3.8% (Zillow)
As of the last week in February, actual 30-year fixed rates were not yet approaching the forecasted highs for the year but ranged between 4.0% at Bank of America, to 4.9% at SunTrust creating an average of 4.45%.
Doug G. Duncan, chief economist at Fannie Mae, says “If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, the improving affordability should breathe some life into the housing market.” This is also true with real estate in Knoxville. We are seeing an increase in the number of home buyers looking to purchase a home in Knoxville.
According to the Washington Post, expectations are that buyers of mid to higher-priced homes will have more availability. Inventory increases are not likely in entry-level areas. The number of sales will decline, with inventory rising slowly, but still remaining tight nationally.
Forbes says that price appreciation slowing, with rates rising, shows that favor has started to shift from seller to buyer. They quoted a senior economist for First American who says that the largest cohort of millennials turning 29, a peak home-buying age, will contribute to an increase in first-time buyer demand, even though housing will be less affordable, and deter some potential homebuyers.
The National Association of Realtors is expecting a median home price of $267K in 2019 and $274K in 2020, reflecting a slower rise in home prices to about 3 percent.
Meanwhile, a slowdown is not all bad. Future prospects look fine as the new demographics are aligned to keep creating demand. Price appreciation slowing, will give incomes a chance to move ahead. And with sales slower, inventory increases. So the 2019 slowdown is creating a healthier real estate market in Knoxville.This is the time for buyers. The real estate agents at Dorn Real Estate love working with first time home buyers, families being relocated to Knoxville and people looking to downsize or expand their square footage. We have a strong handle on the Knoxville real estate market. Contact us today to find out how we can exceed your expectations.