Economic uncertainty looms ahead as investors keep a wary eye on trade tensions and wild stock market swings. One key economic driver that’s increasingly difficult to peg is the housing market. Softer activity in 2018 has set the stage for smaller gains in home prices and mortgage rates in the New Year, but make no mistake, both are expected to go up, according to Bankrate.com. The question in the minds of homeowners and homebuyers is how much will they go up?
Mortgage rates can be difficult to pin down with precision, but experts agree on one thing: Rates will stay north of five percent throughout 2019. The Mortgage Bankers Association forecasts the average 30-year fixed rate mortgage will hold at 5.1 percent for most of the year. As a result, mortgage origination volume will stay flat compared with 2018 at roughly $1.63 trillion, according to Mike Fratantoni, the MBA’s chief economist.
Other experts believe rates will move even higher. Danielle Hale, Realtor.com’s chief economist, says the average 30-year rate will stay at 5.3 percent throughout much of the year, reaching 5.5 percent by the end of 2019.
Slower economic growth in 2019 could temper major rate swings. Unless inflation picks up, rates and home sales will stabilize in the new year as GDP growth slows to 2.3 percent, down from 3.1 percent in 2018, says Fannie Mae Chief Economist Doug Duncan. The economy will slow further to 1.6 percent growth in 2020, he added.
If mortgage rates trend sideways next year, as anticipated, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market.
What this means is, with higher rates, your mortgage borrowing costs will go up. To get the most competitive rate offers possible, boost your credit score and make a larger down payment. You may need to lower your price point to stay within budget…and that means adjusting your expectations of the type of home you can reasonably afford.