The short answer is: it depends.
Last year the answer probably would have been “no," as housing prices were rising sharply, driven by low inventory and high demand. In fact, the median home value in the U.S. increased 7.6 percent — from $209,000 to $223,900 — from December 2017 to December 2018, whereas the historical average annual increase in home values range between three and five percent.
But that was 2018. What about 2019? Here are some widely held predictions by industry watchers and experts:
- More houses will come on the market. When there aren't enough houses on the market to meet demand, prices rise, as they did in 2018. So, more houses on the market should mean more affordable homes, right? Well, not always, as there are other factors in this equation, such as interest rates.
- Interest rate increases will make it harder for some buyers to afford a home. The average mortgage interest rate in 2018 was 4.5 percent APR. Most experts anticipate at least one more rate increase in 2019, bringing rates up to around (or even above) 5 percent APR, the highest they've been in nearly a decade. And while a 0.50 percent increase might not sound like much, depending on the cost of the home, even a small rate increase can make a big difference in the monthly house payment and other costs.
- An increasing cost of living may make it more difficult for buyers to enter the market. Consumer prices are on the rise, driven by a tight labor market, a steadily growing economy and consumer confidence. When the cost of basics like food, transportation and healthcare go up, buyers can be less inclined, and less able, to take on higher monthly housing costs.
- Economic uncertainties abound. Some experts are predicting the economy will slow down, while others go so far as to predict a recession is on the horizon. The trade war with China is giving many businesses concerns. Threats of additional government shutdowns loom, and the political and economic chaos plaguing some of the country's strongest allies and trading partners have many economic forecasters wringing their hands.
In a nutshell, the home-buying tea leaves are difficult to read at the moment. But if you're determined to buy a home in 2019, there are some important steps you can take to be better prepared to purchase a home.
- Have as much saved for a down payment as possible. Having a chunk of change ready to put down on a home can help you in several ways. First, it can help you qualify for your mortgage, and if you're a well-qualified buyer, you have a better chance of having your offer accepted by a seller. This is particularly important in a competitive market where there might be multiple offers on a home. In addition, having a substantial down payment — 20 percent of the purchase price is a good rule of thumb — can reduce the amount you have to borrow, reduce your financing costs and help you get a more affordable monthly payment.
- Get your credit score in shape. Being the best-qualified buyer can often give you a leg up with a seller, and you can't be the best qualified without a good to great credit score. In addition, an excellent credit score typically means you can shop around for the best financing deal, including a preferred interest rate and discounts on closing costs and other borrowing-related fees.
- Do your homework. Familiarize yourself with the areas where you are considering buying. You need to be well informed about price history, school systems, transportation costs, local and county taxes, and much more. This will help you decide if you can afford to live in the area, and also what kind of offer to make on a home if you find one. All this information is readily available on popular real estate sites like zillow.com and trulia.com. And don't hesitate — especially if you are a first-time buyer — to enlist the help of a licensed real estate professional. Often having a pro on your team can help you make the most informed decision, get your offer accepted and save you money.
- Shop and negotiate with your head, not your heart. It's easy to fall in love with a house you can't afford. Or to be so enamored with the neighborhood you buy a fixer-upper when you don't know how to fixer-up. Buying a home is an emotional experience, but it's also a financial transaction — and possibly one of the largest you'll ever make. If you let your heart take over, you could find yourself making a poor financial decision that could have repercussions for many years to come.
There are many variables — some of them changing daily — you need to consider when deciding whether to purchase a home. Since buying a home can have an immediate and lasting impact on your financial well-being, it's extremely wise to take the time to analyze all the factors and run all the numbers before signing on the dotted line.
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