Real estate has been a seller’s market for more than six years, meaning that there are more would-be buyers than homes for sale, sliding the balance of were in sellers’ direction. It will remain a seller’s market in 2019. Realtor.com’s forecast sums it up this way: “While the situation is not getting worse for buyers, it’s also not improving notably in the majority of markets.” How bad is the shortage? Freddie Mac, a government-sponsored enterprise that provides capital to the mortgage market, estimates that 370,000 fewer homes were built in 2017 than were needed to satisfy demand resulting from population growth. “Until construction ramps up, housing costs will likely continue rising above income, constricting household formation and preventing homeownership for millions of potential households,” Freddie Mac concludes.
Mortgage rates to continue rising in 2019?
From the beginning of 2018 to mid-December, 30-year fixed mortgage rates went up a little less than three-quarters of a percentage point, to around 4.75%. Forecasters expect mortgage rates to rise again in 2019 — but at a slower pace. Freddie Mac expects the 30-year fixed mortgage rate to rise half a percentage point in 2019, and the National Association of Realtors predicts a rise of 0.4 percentage point. Fannie Mae’s forecast is for an increase of just 0.1 percentage point.
Keep in mind that these are predictions about where mortgage rates will end this year and end next year. In between, mortgage rates can bounce up and down.
Flying Horse North Update.
Development on the new Flying Horse North Golf Community in northern El Paso County is moving forward, with paving of the initial phase completed and all but 16 of the initial 81 custom building sites having been sold. Planned for a total of 282 lots in the 2 ½ acre to just over 5 acre size range, this beautiful new residential development offers woods, meadows, views, and even a more open “prairie home” environment with unique opportunities for country living.
In addition, a new Flying Horse North Golf Club will sit on a high promontory overlooking the entire front range and service one of the most beautiful and challenging woodlands golf courses in the State of Colorado. Memberships to this new Club are offered with every purchase, and Members will also have full access to the existing facilities at the Club at Flying Horse, with its golf, tennis, swimming, fitness, spa, and grill/fine dining options located just minutes away.
Affordability Still a Concern in the New Year.
“We do worry about affordability, particularly in some areas that have lower inventory” of homes for sale, says Randy Hopper, senior vice president of home lending for Navy Federal Credit Union. The places with low inventory tend to be places where home prices rise fastest, as the demand for homes exceeds supply. Hopper says a gradual rise in mortgage rates won’t cause most prospective buyers to give up on homeownership. On a $300,000 home, an increase of a quarter or a half percentage point “is only going to impact the payment by between $75 and $100 a month,” he says, “which isn’t insignificant.
New Homes get Smaller.
From a home buyer’s perspective, most markets need more houses for sale, and they need to be on the affordable end of the price scale. After all, many first-timers buy starter homes instead of forever homes, with prices below the area’s median. There are signs that home builders are responding by building smaller, more affordable homes.“Continuing a multiyear trend, new single-family home size decreased during the third quarter of 2018,” wrote Robert Dietz, chief economist for the National Association of Home Builders, in a November blog post. “New home size has been falling over the last three years due to an incremental move to additional entry-level home construction. ”According to the U.S. Census Bureau, the median size of single-family homes started in the third quarter of 2018 was 2,320 square feet. That’s 4.9% smaller than the median size of new homes three years earlier, at 2,440 square feet.
More Borrowers choose ARMs.
It’s almost as predictable as May flowers following April showers: Whenever rates on fixed-rate mortgages go up, you’ll see more borrowers opting for adjustable-rate mortgages. It happened in 2018 and it could continue into 2019. Borrowers choose ARMs because the initial rates on adjustables are lower than the rates on fixed-rate mortgages. This gives borrowers lower monthly payments in the first few years. ARM borrowers take the risk that their rates and monthly payments could climb when the rate-adjustment period begins. More borrowers have been accepting the risk. In October, 8.2% of mortgages were ARMs, according to Ellie Mae; 12 months earlier, ARMs had a 5.5% share of mortgages.