Sales of new homes probably will reach a 12-year high this year as builders scramble to meet demand from entry-level buyers, according to Lawrence Yun, chief economist of the National Association of Realtors. Existing home sales probably will be flat, he said.
The number of new houses sold in 2019 probably will total 667,000, the highest level since the beginning of the financial crisis in 2007, Yun said at NAR’s Legislative Meetings & Trade Expo in Washington D.C. on Thursday. Sales of existing homes, which tumbled 3.1% in 2018 as mortgage rates rose to an eight-year high, probably will be flat this year, Yun said. Next year, existing home sales probably will gain 3.7%, he said.
Yun predicted changing migration patterns within the U.S. as buyers give up trying to stretch to get into pricy markets and move to more affordable areas of the country. Nationally, the inventory of homes on the market has grown for eight straight months on a year-over-year basis, and Yun said he expects that to continue. Housing affordability had been falling, according to NAR's Housing Affordability Index.
"While affordability has been sliding, it is still better than we saw in the year 2000. This is due to much lower mortgage interest rates today," Yun said at the conference.
This year, incomes have been gaining at a pace closer to home-price growth as average hourly wages increased, Yun said. Incomes have been climbing from a post-recession bottom hit in 2011, according to data from Sentier Research.
"With strong job creation, wages are growing at a faster pace," Yun said. "Finally, wages and home prices are aligning."
The mix of new houses being sold will shift toward the more affordable end of the market, resulting in a lower median price. Even as sales rise to a 12-year high, the median new-house price will fall 2.8% to $317,300, according to Yun’s forecast. For 2020, he expects new-home sales will grow 7.9% to 720,000 and the median price will increase 1.8%. In March, new-home sales jumped 4.5%, according to an April 23 report from the Census Bureau and the Department of Housing and Urban Development. Sales for that month were 3% higher than March 2018.
Prices for existing homes probably will gain 2.3% this year and 3.3% in 2020, Yun said. That's a slower pace than 2018's 4.9% increase.
The average U.S. rate for a 30-year fixed mortgage probably will be 4.3% this year, compared with 4.5% in 2018, Yun said at the conference. The unemployment rate likely will average 4% this year, not far from last year’s 3.9%, he said. Earlier this month, the U.S. Bureau of Labor Statistics said the U.S. unemployment rate fell to 3.6% in April, the lowest in five decades.