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How 2019 Will Change the Real Estate Market

the suburbs of these states may begin to see a rise in first-time and older Millennial buyers.

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How 2019 Will Change the Real Estate Market

This past year was truly the year of the seller when it comes to the housing market. Prices were up, and buyers were competing for their perfect dream home like a scene out of The Amazing Race. This year, however, looks to be a different story.

Mortgage Rates on the Rise

With mortgage rates at historic lows at the beginning of last year, homebuyers were able to relax a bit. Not that buying a home is a relaxing venture, but lower rates meant more affordable payments for many first-time homeowners. Unfortunately, that bliss did not last.

real estate
Investors are moving towards bonds, which is pushing mortgage rates down. Pixabay

Rates rose throughout the year, and in late December, the Federal Reserve hiked benchmark federal funds rate by 25 points, saying they planned to raise the rate again in 2019. Realtor.com estimates the rate for a 30-year mortgage will hit 5.5% by the end of the year. Zillow.com estimates it could soar as high as 5.8%. However, with the U.S. Federal government shutdown factoring into predictions now, investors are moving towards bonds, which is pushing mortgage rates down. Where the trend goes from here is questionable, but once the government resumes business as usual, it’s likely to rise again.

Housing
Lower rates meant more affordable payments for many first-time homeowners. Wikimedia commons

Inventory Decreasing

While mortgage rates are on the rise, housing inventory is falling. With a decrease in the available homes for purchase, many home-buyers can expect to be outbid and left standing on the sidewalk staring forlornly as someone else moves into their dream home. To make matters worse, home prices are still climbing.

Cheryl Young, a senior economist with Trulia.com, stated, “We don’t see a big infusion of supply coming on anytime soon, and because those prices are still increasing, and they’re outpacing wage growth, affordability is actually getting worse.”

Also Read: Car Subscription – An Alternative to Buying a Car

Which States Are Best?

The housing market is stronger in some states than others, and those statistics change every year. States with a demand for mortgages, where the market is performing well include:

  • Nevada,
  • Alabama
  • Texas,
  • Florida,
  • California,
  • Utah,
  • North Carolina,
  • Colorado,
  • Tennessee,
  • Oklahoma
  • Georgia.

Millennials are shifting into family mode, so the suburbs of these states (and others) may begin to see a rise in first-time and older Millennial buyers. Experts predict suburbs will begin to look like miniature cities as the influx of new families spreads across the country. However this all plays out, 2019 is looking to be a tumultuous year in the U.S. housing market.

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Real Estate Sector Relief may Include Solutions for Stalled Housing Projects for Stressed Home Buyers

There will be solutions on those lines , sources said without divulging if it would be Rs 10,000 crore stress fund as sought

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Real Estate, Housing, Projects
There will be solutions on those lines , sources said without divulging if it would be Rs 10,000 crore stress fund as sought. LifetimeStock

The real estate sector relief expected this week may include solutions for stalled housing projects for the stressed home buyers where projects could not be completed due to funding issues, official sources said,

There have been demand for as stress fund to deal with stalled projects and bail out lakhs of stuck homebuyers from both home buyers and builders side. There will be solutions on those lines , sources said without divulging if it would be Rs 10,000 crore stress fund as sought.

Another official said stressed fund do exist in many countries but owned by private sector adding there are several ways to provide liquidity in the lendings to the sector which is not necessarily through only a stress fund.

Stress funds are a global phenomenon and are present in nearly every mature market. But many of them are private funds.

Real Estate, Housing, Projects
The real estate sector relief expected this week may include solutions for stalled housing projects for the stressed home buyers where projects could not be completed due to funding issues. LifetimeStock

In August government announced more credit support to housing finance companies where it extended additional liquidity support to HFCs by the National Housing Bank, which has been increased from Rs 20,000 crore to Rs 30,000 crore.

In her meeting with the sector representatives, Finance Minister Nirmala SItharaman had met with the two apex realtors’ industry bodies CREDAI and NAREDCO, and the second with homebuyer associations, to discuss the issues concerning the real estate sector and steps to be taken to strengthen the industry.

The government is also likely to make changes to the definition of affordable housing as sought by developers so that more projects can come under the category. Further, bank loans for developers, which have always been an issue as banks try to avoid lending to developers, may witness some favourable changes. Developers and distressed home buyers had suggested to the government that a fund be set up for completion of stalled projects.

Further, the real estate sector also received a shock after the National Housing Bank recently asked housing finance companies to stop funding under the subvention scheme. The government is likely to ease the recent direction in favour of developers.

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Last month industry body NAREDCO had raised the need for a ‘stress fund’ before Sitharaman. If the government agrees to float such a fund, it could become the last-mile capital for large unfinished projects. Home buyers’ body — Forum For People’s Collective Efforts (FPCE) — also wanted Rs 10,000-crore ‘stress fund’ in budget to complete stalled projects. Their view is it is time now to end this problem by creating a ‘stress fund’ to the tune of at least Rs 10,000 crore to complete stuck real estate projects on pan India basis.

The real estate sector is facing multi-year slowdown in demand due to various reasons including tight liquidity situation, default by many builders and elevated level of prices.

The industry is expecting the government to address their concerns regarding liquidity crunch, demand slowdown and stalled projects. Industry bodies have said that the unrest in the sector is due to the of liquidity crunch and poor sales, and demanded that banks and NBFCs should be encouraged to fund projects. The industry fears bad situation during the coming festive season when generally demand is higher. (IANS)