Zillow Releases Bleak 2019 Forecast

If you are a real estate investor, don’t let the tone of Zillow’s latest forecast get you down. The online real estate listing and data giant’s senior economic, Aaron Terrazas, recently wrote that the Zillow “crystal ball” holds “worsening affordability, commutes, [and] natural disaster losses,” explaining, “rising mortgage rates will set the scene for the housing market in 2019…driving up costs for home buyers and creating more demand for rentals.” Even worse, Terrazas wrote, “Even current homeowners could start to feel locked into their mortgage rates.”[1]

Fortunately for investors holding real estate in their portfolios or hoping to acquire more properties in 2019, these conditions may represent opportunity rather than pain points. Terrazas said rent affordability may decline in the coming year as housing affordability continues to be an issue. “As a result, recent (and very slight) drops in rent will reverse and turn positive again.” Investors currently investing mainly in single-family rentals may consider placing capital in multifamily investments as well, as Zillow researchers predict this type of development will experience “steady investment” in 2019.

And speaking of affordability, as housing prices continue to rise in urban centers, commute times are likely to get longer for households led by individuals who work in those centers but choose to live in the more affordable suburbs. Particularly in areas of the country like Boston, Massachusetts, where centralized properties may be worth more than 300 percent more than suburban ones, the situation is likely to only be exacerbated in 2019 as more and more millennials and generation Z households begin looking for single-family options and sacrifice short commutes for more square footage outside the city limits[2].

Of course, no bleak forecast (for homeowners, anyway) would be complete without projections of slowing home value growth. Although October 2018 home values were up 7.7 percent from a year earlier and Zillow projects the October 2018-2019 growth will be as much as 6.4 percent, the company noted its housing panel of experts and economists anticipate a 3.79 percent increase for the calendar year 2019. “Both forecasts indicate cooling from red-hot growth of 8 percent in March of this year,” Terrazas concluded.

Are you concerned about slowing appreciation in 2019, or do you view this as an opportunity?

 

 

 

 

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[1] https://www.zillow.com/research/2019-predictions-22153/

[2] https://reversemortgagedaily.com/2018/11/28/zillow-predictions-offer-grim-outlook-for-2019-housing-market/

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