How will mortgage rates and housing prices change in 2019? - ForumDaily
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How will mortgage rates and housing prices change in 2019?

In the coming year, both buyers and sellers of housing in the US will face new market conditions. How to change mortgage rates and prices for US real estate?

Фото: Depositphotos

Most likely, competition among buyers will decrease - but this does not mean that buying real estate will become easy, writes Fox Business. Instead of relief, they will find that housing prices and mortgage rates are rising, which means it will be more difficult to fit into the planned budget.

For the first time in a long time, there will be some competition among sellers, but well-priced houses will still sell successfully - they are still in high demand. Against this background, the Federal Reserve will continue to play its role - rates will rise. But how long will this growth remain the leading direction of the market?

Fed action this week, to raise base rates, despite the volatility of prices in the stock market and political pressure to lower rates, suggest that the system will act independently, focusing on economic growth and trying to avoid inflation. But the question remains: how high should rates rise?

According to realtor.com's 2019 forecast, the Fed was expected to raise rates three times throughout the year, ending the year at 3%, about 5,5 basis points higher than in mid-November. Against this background, it was also expected that home prices would continue to rise, increasing by 50% for the year, and sales would correspondingly fall, also by about 2%, as buyers tried to balance their budgets with the rising costs of buying a home. Customers' monthly expenses should increase by 2% and income by 8%.

Such forecasts are data based on models for assessing future changes, but objective data can change such assumptions. If we talk about the real situation, mortgage loan rates have not shown an upward trend recently. After hitting 5% in mid-November, rates have even dropped to 4,63% last week, according to Freddie Mac.

Now that the Fed has raised mortgage rates, will they really grow? Paradoxically, not immediately.

Updated forecasts for the week show that the median expected Fed rate in 2019-2021 and in the long term has moved down 25 basis points. That means Fed decision makers expect smaller hikes next year than forecast in September. For this reason, interest rates on long-term bonds actually fell after the Federal Reserve's announcement—suggesting that the recent decline could have an impact on 2019 as well.

However, customers can not relax. The Fed hasn't finished raising rates yet. This means that there is a risk of resuming their growth. Most likely, this will happen between the January and March meetings of the Federal Reserve Service in 2019.

Even if mortgage rates approach 5,5% by the end of the next year, reaching a maximum in a decade, they will still remain low by historical standards. The average mortgage rate in 1990-ies was 8,1%, this figure did not fall below 5% to 2009 year. Therefore, for buyers who can add two plus two, it’s obvious: buying a home is still worth their investment.

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