Positive, yet cautious optimism on U.S. housing market

cautious optimism housing market
Economic conditions around the U.S. housing market calls for cautious optimism.


The U.S. Housing Market in Q1 2019 continued a year-long trend of positive shifts that saw an increase in both new and existing home sales, relatively low foreclosure rates, and falling mortgage rates, suggesting that the market is poised for a strong year. With the housing market boasting some of the best overall numbers since the pre-Recession era, many experts believe that the U.S. may be heading to a buyer’s market.

If so, the market could see improved affordability and easy access to both new and returning buyers. Despite this, with pricing still a problem for individuals living in 71 percent of U.S. counties, some see the current market as a mixed bag. Others point to a pricey rent market and current Federal Reserve policy as evidence that the market could be heading to a slowdown.

With this in mind, just what can we gleam from Q1 2019 data? Let’s take a look at data from a variety of Q1 reports to see how the market has been performing and just what consumers have in store for the rest of 2019. Overall, the data overwhelmingly predict continued growth and accessibility, even if there are potential red flags to keep in mind.


Overall, 2018 was a positive year for the U.S. housing market, with a leveling off of mortgage interest rates at around 5 percent and a significant reduction in home prices toward the latter end of the year. Experts believe that the strength of the market in 2018, combined with a continued rise in wages and drop in the unemployment rate, signal a new era of real estate growth in 2019.

But how accurate were these predictions for Q1? As a whole, affordability reached its best rates since before the Recession, with several U.S. regions reporting more affordable housing rates than in years past. Some other key findings indicate that the foreclosure rates—despite being up 7 percent at the end of Q1 from the month prior—are down a full 21 percent from rates at this time last year.

These findings justify the positivity market experts felt at the end of 2018. With that being said, however, it becomes important to note that a few statistics did not follow a positive trend. Rental prices, for example, continued to climb, putting an extra $400 of costs on the backs of renters. This is a number that one Zillow economist believes to be unsustainable, with a correction in the rental market soon upcoming.

With Q1 data indicating a relatively strong market—albeit one that’s got its setbacks—it becomes important to parse the information and examine it individually for a more in-depth look at the market. Let’s take a look at specific subsets of data from major economic Q1 reports.


Just how much did new home sales increase over Q1 2019? According to data, new single-family home sales rose to 667,000 in February 2019, a 4.9 percent increase over the 636,000 number posted in January. As part of this, sales in every region of the United States, excluding the West, increased. This marked the best numbers since March of 2018, sparking optimism amongst economists.

The move came on the heels of a slump from December to January and continued a larger trend of growth. With new home sales at their highest rates in Q1, economists are optimistic about the current market for both first-time and existing buyers.

In what is more good news for the market, existing home sales witnessed a surge during Q1, with the National Association of REALTORS (NAR) showing that existing home sales jumped a full 11.8 percent from February to January, the largest jump since December 2015. In total, existing home sales increased to 5.51 million, with nearly every region of the U.S. (excluding the Northeast) seeing increases in their existing home sales.

In regard to the phenomenon, chief NAR economist Lawrence Yun stated, “A powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence is driving the sales rebound.”

Of the 5.51 million existing home sales, a full 32 percent of transactions were among first-time buyers—a 3 percent increase over last year and an encouraging sign for economists. Among the sales, 4.94 were single family homes, which jumped a full 13.3 percent from the month before. Overall, the data indicate positive market trends and a more accessible market for buyers.

This is especially true given the increase in inventory. February housing inventories showed a 3.2 percent increase from 2018 levels at the same time, with a total number of 1.63 million in inventory. According to NAR, the greater inventory levels are a welcome sight to the market, which now has a 3.5-month supply of unsold goods.

Overall, though the total pace of home sale growth is down 1.8 percent on the year-to-year average, the current growth rate of 11.8 percent month-to-month indicates a strong market for sellers.

Mortgage Rates

Mortgage rates remained low throughout Q1 2019, despite expectations to the contrary. In a statement, Freddie Mac’s chief economist Sam Khater remarked, “The real estate market is thawing in response to the sustained decline in mortgage rates and rebound in consumer confidence.”

The remarks echoed statements issued by Todd Teta, chief product officer of ATTOM Data Solutions, following the group’s positive Q1 economic report, which analyzed 473 counties across the United States. Teta noted, “However, quarterly wage gains have been outpacing price increases for more than a year, and mortgage rates are falling, which have helped make homes a bit more affordable now than they’ve been in a year.”

The consensus? That lower-than-expected mortgage rates are helping fuel the recent boom in housing sales. Important is the finding that wage gains are now moving at a quicker rate that rate increases—making the market more accessible to a wider class of buyers and forming the prime environment for sellers.

Low mortgage rates, combined with wage gains, have painted a new picture of affordability for millions of Americans in Q1 2019. Q1 data shows that the average wage earned would need to shell out 32.7 percent of their annual income to purchase an average-priced home. This makes only 49 percent of markets less affordable than their historic averages—a number that, while still high, is down from 76 percent in Q4 2018.

Of course, the inverse is also true, meaning that of the 473 counties analyzed in the Q1 ATTOM Data Solutions report, 51 percent were more affordable than their historical averages.

Overall, the tone is positive, with the potential of a buyers’ market on the horizon. Regarding the report, Teta goes on to say, “The economy could slow, and interest rates could go back up, but the signs point to the possibility of an impending buyers’ market.”

In other words, Q1 data reveals optimistic market trends that should encourage both buyers and sellers to jump into the real estate market. For buyers, especially, 2019 represents a great time to capitalize on the market. According to Redfin, “More than any time in the past few years, 2019 is shaping up to be a good year for homebuyers. One way the market has shifted to buyers: more price drops. As of mid-February, more than one in five homes for sale had a price drop—the largest February rate in at least 10 years.”

Economic Events

With this information in mind, it’s important to take a look at what potential outside economic events could impact the housing market past Q1 2019. The first quarter benefited from lowered interest rates, increased wages, lower unemployment, and increased consumer confidence with a resurgent economy. Still, some experts warn that the good spirits of the current U.S. housing market could be in peril when looking at current Federal Reserve data.

The Fed, which has increased interest rates by 2.25 to 2.5 percent over the last few years to keep up with the burgeoning economy, has expressed no plans to raise rates over the 2019 fiscal year and only sparsely in the years to follow. To some economists, this signals a veiled pessimism in terms of the economy.

This comes on the back of 2018 reports predicting multiple 2019 interest rate hikes. While this is good news for buyers in the short term and further solidifies the potential emergence of an upcoming buyers’ market, it does cast doubt on the economy as a whole and the U.S. housing market for the remainder of 2019.

According to the New York Times, “The Federal Reserve said Wednesday that the United States economy was slowing more than it had previously thought and painted a far less rosy economic picture… as it left interest rates unchanged and signaled little appetite for raising them again in the near future.”

For buyers and sellers, this news comes as a double-edged sword. While lower interest rates will help to keep prices low and the market booming in the months to come, it does call into question the long-term viability of the current housing market boom. To many, the Fed’s caution is a sign that current positive trends may not be sustainable.

In a statement, Federal Reserve Chair Jerome Powell stated that the economy is in a “good place” but remarked that buyers, sellers, and investors alike shouldn’t get too comfortable. According to HomeLight, “The Fed’s decision to stop hiking rates is a direct response to the slowdown in job growth, consumer spending, and business investments.”

With the long-term viability of the economy in doubt, it is unclear how much the housing market will continue to grow past 2019 or even in the latter half of the year. For buyers and sellers, this could mean that the time to buy and sell is now. For those looking to make an optimal investment, it is possible that 2019 marks a peak year—at least if Q1 data is to be believed.

A Surge in Construction

Another positive Q1 2019 trend is the construction boom. In contrast to the final quarter of 2018, builder confidence is causing a surge in the pace of new construction. According to a report from NAHB, “Builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season.”

According to the data, low selling points and greater inventory levels could allow entry-level buyers into the market. Some experts note that, while this may benefit buyers, the construction of new homes could make it harder for existing homeowners to sell their properties. For many, this may indicate that the time to sell is now, as the building market only looks to continue its surge.

MarketWatch states, “The housing market slowdown of 2018 is starting to look like a pause, rather than the beginning of the end for the cycle.” With this information in mind, it is crucial that existing homeowners take the necessary steps to maximize their earning potential from selling their homes.

For builders, however, this positive outlook potentially signals a new era of growth and increased profits. This could have long-term effects on the housing market, especially considering recent wage increase patterns and the steady lowering of mortgage rates.

Final Thoughts

Q1 2019 U.S. housing market data presents investors and sellers alike with an overall positive outlook for the remainder of the year. With several key factors at their best level in months or years (including wage growth, mortgage rates, inventory levels, and home sales), the data seem to point to a burgeoning buyers’ market that could benefit both buyers and sellers alike.

This comes despite the fact that the Federal Reserve and certain economists warn of potential economic slowdown over the next few years. Overall, the tone of investors is one of cautious optimism, and more strong housing reports like the ones offered in Q1 could further bolster this positive outlook.

For buyers and sellers alike, this means that 2019 is a prime year to jump into the real estate market. With low-level selling points optimal for buyers and a large base of consumers marketable to sellers, the U.S. housing market is positioned for growth over the next few quarters, confirming positive economic reports that emerged in the final quarter of 2018.

With Q1 data in the books, it appears the U.S. housing market has reentered prime-time, with 2019 set to be a positive year for buyers and sellers. And while the long-term sustainability of current housing market trends is up for debate, it’s clear that there’s a lot to gain from jumping into the market today.

What do you think?

Written by HousingMarket

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