Mortgage Blog

What can we expect with new construction and home sales in 2019?

January 11th, 2019 11:43 AM by Eric Fang

1)New construction is forecasted to see a slight decrease in 2019

According to Dodge Data & Analytics, a reliable source of information for the construction industry forecast, new construction will hold even with numbers from 2017 and 2018. Construction starts advanced 11 percent to 14 percent yearly from 2012 through 2015, but between 2016 and 2017, new construction saw a 7 percent increase and a mere 3 percent rise in 2018. The construction market should see similar patterns in 2019. 

Challenges facing new construction and development include an uncertain interest rate environment as well as increased labor and material costs. However, Robert A. Murray, chief economist for Dodge Data & Analytics, believes that these challenges are offset by a strong economy and slight easing of bank lending standards. 

In saying that, forecasts project that for 2019, total construction will start off with numbers similar to 2018 and end with a slight decline. Residential new home construction may see a slight drop of about 2 percent. 

Commercial buildings, including office, warehouse, and hotel construction, may also experience a weakening as we move forward into 2019. 

Overall, new construction and development will likely see a slow start for 2019. Factors that may adjust these forecasts are job growth, wage increases, a pullback in rates and the stabilization of the stock market. 

2)New home sales may decline in 2019.

As 2019 comes into view, keep an eye on what the housing market will bring. Due to uncertainty with interest rates, many prospective new homebuyers are cautiously waiting on the sidelines to see where rates may go. 

The Federal Reserve increased the Fed Funds rates in 2018 with expectations of further increases in 2019, but recent forecasts indicate that the Fed may not increase interest rates in 2019. For now, interest rates remain attractive relative to earlier in 2018, but continued uncertainty has the potential to create indecision among buyers throughout the year. 

According to the Mortgage Bankers Association (MBA), mortgage applications for newly constructed homes fell by 14 percent in November compared to October. Even with adjustments made for annual seasonal declines in the housing market, application rates were down by 11 percent from the same time in 2017. According to Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting, actual new home sales fell by 7 percent and are about 5 percent lower than November 2017. 

Since many homebuyers are on a holding pattern, housing prices are weakening in some markets and the days that a home is on the market are increasing. Instead of putting their homes on the market, many sellers are opting to stay put and build more equity in their homes while spending money on home improvements to increase values. For now, the forecast is predicting a slowdown in new home sales for 2019. 

Posted in:General
Posted by Eric Fang on January 11th, 2019 11:43 AM



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