As we start a brand new year, real estate experts and financial professionals are making their predictions about what the next 12 months will look like for the California housing market. We took a look at the major trends that are shaping up for 2019.
- The number of homes sold will be slightly lower in 2019 than in 2018.
A number of experts, including the California Association of Realtors (C.A.R.), predict that 2019 will see a softening in the real estate market. However, according to C.A.R., the decline in single-family home sales will be relatively modest, in the of 3.3 percent range.
The lack of affordable homes in 2018 will impact 2019, with potential buyers staying out of the market for longer because of their feelings about affordability. C.A.R. President Steve White said, “Would-be buyers who are concerned that home prices may have peaked will wait on the sidelines until they have more clarity on where the housing market is headed. This could hold back housing demand and hamper home sales in 2019.” The decline will be the first in four years in the booming California housing market.
- Interest rates will likely rise.
Real estate experts across the board, including C.A.R., believe that interest rates will rise, which will dampen the housing market in 2019. It’s expected that the average
30-year, fixed mortgage rate will rise to 5.2 percent or higher, up from 4.7 percent in 2018. Mortgage rates in recent years have been below average relative to the strong growth in the economy. Thus, 2019 will see things getting back to more normal levels.
- Home prices will continue to go up.
California’s home prices are still expected to increase in 2019, by about 3.1%. But this is a drop from the 7.0 percent gain in 2018. C.A.R.’s Senior Vice President and Chief Economist Leslie Appleton-Young said, “The surge in home prices over the past few years due to the housing supply shortage has finally taken a toll on the market. Despite an improvement in supply conditions, there is a high level of uncertainty about the direction of the market that’s affecting home buying decisions. This psychological effect is creating a mismatch in price expectations between buyers and sellers will limit price growth in the upcoming year.”
- People will be leaving the Bay Area and parts of Southern California.
Because housing is so expensive in the Bay Area and also parts of Southern California, the trend of people moving to less expensive counties or even leaving the state altogether is expected to continue in 2019.
According to C.A.R., last year, 35 percent of homebuyers in the Bay Area and in Southern California moved out of their county due to affordability issues. This trend of out-migration will continue in 2019 as housing remains too expensive for too many.
5. It will be more of a buyer’s market.
While California housing will continue to be among the most expensive in the country, 2019 is expected to be more of a buyer’s market. It’s expected that homes will stay on the market longer and buyers will feel they can get better deals than in 2018. Some experts expect that homes will sell for less than the asking price.
6. Landlords will need to offer more perks to attract renters.
Just as 2019 will be a buyer’s market for those looking to purchase a home, it will also be a renter’s market. Landlords will offer more amenities, such as fitness rooms, dog runs, communal gardens, and access to co-working spaces in order to attract more tenants, says Curbed.
- More millennials will get into the market.
It’s predicted that more millennials will be buying their first home in 2019. In an article in Forbes, according to Senior Economist Odeta Kushi of First American, “The largest cohort of millennials will be turning 29 and entering peak household-formation and home-buying age,” which will contribute to an increase in first-time buyer demand.
Danielle Hale, the chief economist for Realtor.com said, “Millennials will make up the largest segment of buyers next year, accounting for 45% of mortgages, compared to 17% of Boomers, and 37% of Gen Xers.”
- Technology will have an increasing impact on real estate.
Just as technology is transforming the automotive industry faster than anyone expected, it will also have a dramatic impact on the real estate market. Artificial intelligence will play a bigger role in building design, organization, and management.
According to housing website Curbed, developers and building managers will use machine learning to analyze user behavior in shared office spaces and residences to re-design layouts, understand energy usage, and decide on what amenities should be offered. In addition, technical advances will be used to make buildings physically safer and more secure.
Furthermore, new online tools and platforms will emerge to make real estate transactions more efficient and hassle-free.
- Energy efficiency and sustainable building practices will gain in importance.
As concerns about how climate change will impact where we live and work, there will be a stronger emphasis on making buildings more environmentally sustainable and energy efficient in 2019.
Green building practices will play a role across the board, from building design to construction, materials selection, recycling of debris, and making water and energy usage more efficient. Solar panels, electric vehicle charging stations, smart thermostats, and other technological advances will become the norm.
10. Warehouse space will be in-demand by ecommerce companies.
As the way we shop continues to evolve, it’s predicted that ecommerce companies, especially Amazon, will clamor for more warehouse space almost everywhere as consumers expect to get items they order almost immediately.
- New home construction will continue to rise due to the housing crunch.
With half of today’s renters now paying more than 30% of their income on housing, the entire U.S. has a housing crunch. This bodes well for an increase in new housing being built in 2019. And this trend shows no sign of slowing down. It’s estimated that the country will need 4.6 million more rental units by 2030.