Thanks to rising mortgage rates, sales will continue to be sluggish and inventory will rise in the year ahead. Price gains will continue, but they will be comparatively small.
And yes, a recession could be on the horizon, but not before 2020, most economists agree.
“The very idea of asking when a recession is going to occur is silly,” said economist Christopher Thornberg, founding partner of Beacon Economics. “You need to ask why (it would occur). If you don’t have a why, no recession.”
So if you’re looking to buy a house to live in, experts interviewed said, go ahead — with some caveats. More on that later.
But if you’re looking to make a killing flipping houses, hold your horses.
“I think those days are over,” said Chapman University economist Jim Doti.
Fewer home sales
CAR’s forecast is blunt: California transactions will fall 3.3 percent in 2019, on top of a 3.2 percent drop in 2018.
That could be good for home shoppers: Less competition.
In Orange County, existing house and condo sales are projected to decrease 4.7 percent, according to Chapman.
This doesn’t mean the sky is falling, said real estate consultant Pat Veling, president of Brea-based Real Data Strategies.
“The market is correcting to a more normal condition,” Veling said. “The problem is, we haven’t seen a normal market in so long, people don’t know what it looks like.”
Mortgage rates to rise
Historically low mortgage rates helped fuel the market rebound of the past 6 1/2 years. Then came rate hikes, and sales started to slide.
Next year, forecasters say, rates will go still higher.
According to forecasts by UCLA, CAR, Chapman and Cal State Fullerton, mortgage rates will be in the 5.2-5.5 percent range by year’s end, compared to a 2018 average of 4.5 percent.
“Rising mortgage rates, lower housing affordability and rising levels of unsold housing are all rearing their heads,” the Chapman forecast said.
A good time to buy - really
Hindsight shows 2007 was a terrible time to buy a home while 2013 was a great time.
So what about today? Will 2019 be a good time to buy?
CAR asked California consumers that question in September. Seventy-eight percent said no.
Economists beg to differ, provided you stay put for at least five years, if you can find a house you can afford in a neighborhood and school district you like, then market ups and downs won’t affect you, said Green, the USC Lusk Center director.
“You buy a home when you can afford it,” added Anil Puri, director of Cal State Fullerton’s Woods Center for Economic Analysis and Forecasting. “Timing the housing market is like timing the stock market.” Meaning, it’s pretty hard to do.
Chapman’s Doti figured buying a home could pay off even if prices don’t go up much. If home prices rise just 2 percent a year over the next seven years, a home purchase could yield a better return than some stock market investments, he calculated.
“Even in this current housing correction,” Doti said, “buying a home is still a good long-run investment.”
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