Existing home sales are down 6.6 percent in the first three months of this year, but that is not deterring a positive outlook for the remainder of the year according to the April 2019 forecasts from Fannie Mae, Freddie and the Mortgage Bankers Association. Each month these three update and revise their forecasts for new and existing housing sales and median prices, with Fannie and Freddie currently forecasting through 2020 and the Mortgage Bankers going out to 2021. These are the best estimates of expectations available.
Existing & New Home Sales
The following table shows the forecast based on their April 2019 forecasts for existing home sales. While existing home sales are anticipated to rise just 0.9 percent in 2019 (based on an average of the three forecasts), the range of change goes from flat to an increase of 2.2 percent. In 2020 the current outlook is for a 2.5 percent gain in total existing home sales. New home sales are anticipated to rise by 2.4 percent in 2019 and 3.3 percent in 2020.
Median Home Prices
Strong median home price increases seen in recent years are softening — with some local markets actually seeing price declines. Median prices for existing homes were up 4.6 percent from $245,950 in 2017 (based on the 12-month average of the monthly median prices) to $257,280 in 2018. The current outlook is for median home prices to rise 3.0 percent in 2019 and 3.5 percent in 2020. New home prices are expected to increase 2.2 percent in 2019 and 3.3 percent in 2020. The slower price rise in new homes is due to the growing offering of entry-level new-home construction. In 2013 (when there was little if any new entry-level home construction) the typical new home cost almost 40 percent more than existing properties. Today that premium has shrunk to slightly less than 24 percent.
Despite the upside expectations for home sales in 2019, I reiterate my expectation for existing home sales to be down 2 percent in 2019 compared to 2018, with the median price rising from 2.4 to 3.0 percent. The greatest challenge in housing today is the hurdle of affordability. From 2010 to 2017, median household income rose from $49,445 to $61,372, for a gain of 24.1 percent. In that same time period, existing home median prices (on an 12-month moving average) jumped from $172,400 to $259,600 a gain of 50.6 percent, more than double the increase of income.
Seasonality has a material impact on prices, typically peaking in June and hitting the lowest levels of the year in January and February. See the Stewart Blog at http://blog.stewart.com/stewart/2018/12/11/tis-the-season-when-the-most-and-fewest-homes-sell-and-also-the-greatest-and-least-prices/ for a discussion on seasonality.