Continued economic expansion, rising home sales and an increase in wage growth that is on par with home price growth are some of the expectations for the second half of 2019.
Dr. Lawrence Yun, Chief Economist at the National Association of Realtors®, delivered his 2019 midyear forecast, which predicted changing future migration patterns as buyers search for more affordable markets. Inventory in the U.S. has grown for eight straight months on a year-over-year basis, and Yun expects that to continue.
“Home sales should be much stronger based on the economic fundamentals of jobs, interest rates, population and consumer confidence,” said Yun.
After several years of wage growth outpacing home price growth, this year both are more closely aligned as average hourly wages accelerate. “With strong job creation, wages are growing at a faster pace. Finally, wages and home prices are aligning,” Yun said. “This is good news for employees.” He added that this shift is a healthy development toward keeping housing affordability stable.
That said, because of significant differences in home prices between metro markets, Yun says there may be a steady shift in the relocation of people and companies into more affordable regions of the country. 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 says.
Danielle Hale, Chief Economist at Realtor.com®, also spoke and projects that year-over-year inventory growth will be moderate nationwide. Realtor.com® has seen listing prices up 6.9% year-over-year in April. The REALTORS® Affordability Distribution Curve and Score produced by NAR and realtor.com® shows that higher income households have more access to available inventory.
“We used to see home price growth only around the coasts, but now we’re seeing it throughout the country. Nationwide there are not enough affordable homes on the market, and those numbers have been declining,” Hale said.
The third panelist – Dr. Johannes Stroebel, associate professor of finance at New York University – discussed a recently developed paper on behavioral economics and housing. His research evaluated how Facebook data and individual beliefs about the local housing market could influence friends’ purchase choices.
People’s beliefs about whether buying a house is a good investment are driven by the house price experiences of their friends, Stroebel said. “Friends experiences are fundamentally related to personal beliefs of the housing market investments and influence personal behavior.”
According to Stroebel, having Facebook friends who experience a 5% increase in home prices over the past two years can increase the probability that a renter buys a home over the next two years by 3%. “Individuals do discuss property value with their friends, and this changes behavior,” he said.
Positive experiences were even shown to increase size of a home individuals purchased. “When home prices in socially-connected counties go up, it causes a reaction that changes home prices locally.”
The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.