There’s no question that 2018 has been a challenging year for the housing market — despite low unemployment and a strong economy. Since our last Market Update in September, housing prices and have continued to rise. Trade tariffs put in place by the Trump administration have begun to take a toll on the economy as a whole with an increase in the value of the dollar and more specifically the stock market. The rampaging bull market of three months ago has dipped precipitously (800 points between February and October) leaving Wall Street analysts and investors dreading the return of the bear.

The mid-term elections confirmed Republican fears that a blue wave was imminent. At last count the Democrats gained 39 seats in the House of Representatives, with Republicans increasing their majority in the Senate by four seats.

On the positive side

  • Fannie Mae and Freddie Mac have raised the maximum conforming loan limits for 2019 from $453,100 to $484,350 and have placed a ceiling of $726,525 — or 150% of $484,350 in high-cost areas.
  • While the Fed is likely to raise the interest rate again in December, Fed Chairman, Jerome Powell has indicated 2 rate hike increases for 2019 down from an expected 3.

Third quarter data

According to Fannie Mae, Core Logic, and the National Association of Realtors

  • 5.1 million. Sales of existing homes down year-over-year from 5.5 million in Oct 2017
  • $255,400 or a 3.8% increase in the median price for an existing home compared with $246,000 a year ago
  • 80. The number of months that have seen a year-over-year increase in the median price of existing homes
  • 1.88 million. The number of existing homes available for sale — a year-over-year increase from 1.80 million a year ago
  • 4.3. The number of months the current supply of homes has if the current rate of sale continues — down from 4.4 in the previous month, but up from 3.9 months a year ago
  • 33. The number of days a property typically stayed on the market, up from 32 in September but down from 34 days a year ago
  • 31%. The number of homes sold to first-time buyers in October, down a point from last month and 32% year-over-year
  • $11 billion. The amount Fannie Mae has subtracted from its 2018 estimate of home loan originations. Current prediction is $1,624 trillion
  • $21 billion. The amount Fannie Mae has subtracted from its 2019 estimate of home loan originations. Current prediction is $1,603 trillion
  • 2.6%. Fannie Mae’s forecast for expected growth in Q4 2018, and full-year growth of 3.1%
  • 2.0%. The inflation rate for the 5th consecutive month
  • 5.1%. The home turnover rate from 2016–2018

Other factors to consider

  • There are potential downside risks heading into the new year as a result of a slow down in business investment
  • Holiday sales should indicate whether fear of declining consumer confidence is warranted
  • The impact of hurricanes in the SE, California wildfires, and an earthquake in Alaska

Helpful Resources:

Fannie Mae Economic Developments – November 2018
Fannie Mae Forecast
CoreLogic Market Pulse November 2018
National Association of Realtors – November 21, 2018