As a realtor in the Algonquin area, I often get asked: what are your thoughts on the 2019 housing market, and where are things going next year? And are we headed for another market crash anytime soon?
I’ll preface this by saying I am not the gloom and doom type. In most situations I’m more optimistic than pessimistic… Sometimes to a fault! But putting all of that aside, I think it’s important to evaluate some facts first when sharing my thoughts on the 2019 housing market.
1. Building permits are trending up! In a June 2018 report, the National Association of Home Builders stated: “Over the first 4 months of 2018, the total number of single-family permits issued nationwide reached 279,302. On a year-over-year basis, this is an 8.4% increase over the April 2017 level of 257,719.”
I’m seeing a lot of new homes becoming available in the Algonquin, Lake in the Hills, Huntley, Crystal Lake and Elgin areas.
When looking at the condition of the housing market, new construction is a good place to start. Even with tariffs in place and construction costs on the rise, overall activity is trending up. We always like to see an increase in building permits, that’s a sign of a stable market.
2. It’s Still a Seller’s Market. You’re hearing it everywhere you go in the Chicago area (and nationwide) from Algonquin to Huntley, Lake in the Hills to Crystal Lake – inventory is low. Buyers are getting frustrated with the limited options available. When they do find a home, they’re often in a multiple offer situation that creates a bidding war.
In a stable market, 6 months of inventory is common. In many Chicago markets right now, such as Lake in the Hills and Huntley, we’re seeing 2-4 months of inventory available. And some have even less than 2 months!
Sellers are still in a stronghold position, and most likely will be for next year.
3. Mortgage Interest Rates are Rising. I’ve addressed this in past blogs: rates are going up, and have been for the last 12 months. Last year, I had clients locking in 30 year fixed loans in the high 3% range. Those days are long gone, as today, rates are hovering in the mid to upper 4% range.
Back in June 2018, the Mortgage Bankers Association (MBA) predicted that 30-year mortgage rates would go up to 4.9% by the 4th Q of 2018, and climb upward in 2019. Freddie Mac economists echoed those predictions.
As the economy continues to surge and unemployment rate remains low, experts are saying it’s possible mortgage rates to rise above 5% in 2019.
In Summary: Thoughts on the 2019 housing market. I don’t think we’re headed for a market crash anytime soon. We have to remember what the market crash from 10 years ago was mainly built on – sub prime mortgages. And those sub prime mortgages were packaged, bought & sold in the secondary market with false AAA ratings!
Today, lenders are still strict when it comes to getting approved for a loan. And foreclosure and mortgage default rates are at historically low levels. I don’t think we’ll see rates get back down into the 3% range; I think in 2019 we’ll see rates continue to rise, and head back in the low 5% range.
Another prediction: I don’t think we’ll continue to see the same home value appreciation percentages that we have seen in the last 4-6 years. I think most Chicago markets will see smaller, more conservative value appreciation. Some markets will flat line. But I don’t think we’ll see prices take a steep drop.
Thank you for taking time to give this a read! And please share with anyone you know that is looking to sell or buy a home in the Algonquin, Lake in the Hills, Huntley, Crystal Lake or surrounding area… I hope I’ve provided some value!
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