Dwindling housing affordability may push many prospective buyers back to the rental market in 2019, and natural disasters will claim a record number of homes, according to a new forecast from Zillow.
The real estate company expects mortgage rates to continue to rise in 2019, worsening affordability for many.
“After rising by about 100 basis points since January 2018, expect mortgage rates to continue to grow steadily through 2019, ending the year just under 6%,” Zillow said. “This will be the highest rates have been since the last recession, although still below the historic average at times of strong economic growth.”
As rates rise, the rental market may well reverse its recent slowdown, Zillow said.
“The higher rates will limit what people can afford to pay, and those who are financially stretched but considering buying a home may decide to continue renting,” Zillow said.
The company also warned that a record number of homes would be lost to natural disasters in 2019 as their frequency and severity increase.
“About 15,000 homes were destroyed by wildfire in California alone in 2018, and many others by storms along the gulf coast,” Zillow said.
The news for next year isn’t all bad, according to Aaron Terrazas, Zillow senior economist.
“Certain headwinds – including rising mortgage interest rates, higher rents and stiff competition for housing in the most desirable areas – will only grow stronger over the next year, but that won’t necessarily be a bad thing,” Terrazas said. “A slower-moving market is likely to give more buyers a chance to catch their breath and choose from a wider selection of homes that fit their budget.”