Consumers should expect home sales to flatten and home prices to continue to increase, though at a slower pace, according to a residential housing and economic forecast session at the National Association of Realtors® (NAR) 2018 REALTORS® Conference & Expo in November.
As Lawrence Yun, chief economist for NAR, presented his 2019 housing and economic forecast, he was joined onstage by Lisa Sturtevant, President of Lisa Sturtevant & Associates, LLC, who discussed the importance of affordable housing in the U.S.
Much of Yun’s presentation focused on recent declines in home sales, but in the context of long-term trends to illustrate the housing market’s actual performance.
“Ninety percent of markets are experiencing price gains while very few are experiencing consistent price declines,” said Yun. “2017 was the best year for home sales in ten years, and 2018 is only down 1.5 percent year to date. Statistically, it is a mild twinge in the data and a very mild adjustment compared to the long-term growth we’ve been experiencing over the past few years.”
In Lehigh and Northampton counties, year to date, home sales are up 0.1 percent, according to the Greater Lehigh Valley REALTORS® most recent market report released for October. The Median Sales Price is up 8.1 percent. The Lehigh Valley is known, as seen here, for following national housing trends. Carbon County, which is its own unique market, has been experiencing a stellar year, partly due to homebuyers looking for inventory not currently available in the Allentown-Bethlehem-Easton area. In Carbon, home sales and home prices, year to date, are up 13.4 percent and 17 percent, respectively.
As to the possibility that we are currently experiencing a small bubble, Yun was quick to shut down any speculation. “The current market conditions are fundamentally different than what we were experiencing before the recession ten years ago,” said Yun. “Most states are reporting stable or strong market conditions, housing starts are under-producing instead of over-producing, and we are seeing historically low foreclosure levels, indicating that people are living within their means and not purchasing homes they cannot afford. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust.”
Yun’s words on foreclosure levels hold true for the Greater Lehigh Valley. According to October market statistics for Lehigh and Northampton counties, only 1.1 percent of the available market (23 properties) were labeled as lender-mediated. In Carbon County, lender-mediated properties came in at 0.6 percent (two properties). Lender-mediated properties are those marked as foreclosed, REO, bank owned, pre-foreclosure or short sale.
Both panelists also discussed housing affordability. While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability. “NAR research shows that a lower percentage of consumers think that now is a good time to buy, while more are indicating that it is a good time to sell,” said Yun. “Problems could arise if the market is flooded with too many sellers and not enough buyers. Fortunately, that does not appear to be the case, as indicated by months’ supply of inventory at below five months.”
Again following the national trend but marching a tad lower, the Months Supply of Inventory for Lehigh and Northampton counties in October came in at 3.0 months. In Carbon County, the Months Supply of Inventory was 6.1 months. Carbon has been a more balanced market between buyers and sellers throughout the year, while Lehigh and Northampton counties have seen more buyers than there are sellers.
Sturtevant discussed the importance of homeownership on a social level – how homeowners tend to be in better physical and mental health and have greater opportunity for economic self-sufficiency. Additionally, communities with more homeowners tend to be more economically prosperous and better able to attract and retain workers.
“I am a researcher, not an advocate; but the results of my research have compelled me to see the importance of affordable, stable housing, and the positive economic impact to local communities,” said Sturtevant.
Looking to next year, Yun shared his forecast for home sales and median home prices. “The forecast for home sales will be very boring – meaning stable,” said Yun.
With a few months of data remaining in 2018, Yun estimates that existing-home sales will finish at a pace of 5.345 million—a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase.
The national median existing-home price is expected to rise to around $266,800 in 2019 (up 3.1 percent from 2018 this year and $274,000 in 2020. “Home price appreciation will slow down – the days of easy price gains are coming to an end – but prices will continue to rise.”
All of these forecasts, however, are dependent on higher levels of home production. “All indications are that we have a housing shortage. If you look at population growth and job growth, it is clear that we are not producing enough houses.”
Commenting on the overall health of the U.S. economy, Yun noted that the economy is “good.” He noted that we have low unemployment, record high job openings, historically low jobless claims, job additions for eight straight years and wages beginning to increase. “This type of activity in the economy should support the housing market, even as interest rates rise,” said Yun.
* National data provided by the National Association of Realtors® and Lawrence Yun, NAR’s Chief Economist and Senior Vice President of Research