As 2018 winds down, it’s time to look at what the new year may have in store when it comes to the housing market. Whether you are a prospective first-time buyer, or considering a refinance, knowing what’s likely to come in the months ahead will help you plan accordingly. Here are a few of the industry’s best guesses about housing trends for 2019.

Interest Rates

Unfortunately, most inside sources are confident we will see a continued climb in interest rates. Rates were just under 4% at the beginning of 2017. We expect to see the average rate clear 5% in 2019. Several months ago, the Mortgage Bankers Association predicted an average rate of 4.8% by the end of 2018 and Freddie Mac estimated an average rate of 5.1% for 2019.  As of September 2018, we are seeing rates of 4.92%. We have every reason to believe the forecasts will be accurate for the new year.

Buyer’s vs. Seller’s Market

Most likely, we will continue to see a seller’s market, with less inventory than demand. We are currently seeing a lack of inventory across the board, which forces prices up. Buyers have more competition, and this is going to continue into 2019. While there are variations from market to market, Western markets in particular are expected to be consistently competitive. Interestingly, currently only about 30% of California residents own their home. Between the increased competition and the rising interest rates, purchasing a home will be more expensive than in years past. But if the job market remains strong, more people will be able to afford to buy in 2019.

Continued Rise of First-time Buyers

Much attention is generally paid to millennials because they make up a large portion of the nation’s home-buying contingent. With millennials currently ranging in age from 22 to 37, millennials who were once the largest group of renters are now becoming the majority of first-time home buyers. As we look at housing trends for 2019, we expect this pattern to continue. With interest rates slowly creeping up, buying a home is not going to get less expensive anytime soon. Millennials and other first-time buyers are realizing there’s no time like the present. So even with increased competition and rising prices, first-time buyers are likely to continue to enter the market at unprecedented rates.

New Construction and Overall Inventory

Partly due to the decrease in availability and partly due to the lag between filing for a building permit and building the house, we expect to see a continued increase in the number of new home starts as we get into 2019. However, as many sources are reporting, in general, we are likely to continue to see a shortage of housing—both existing and new construction—in 2019. This shortage will continue to impact list prices of the houses that are available, which will push some potential buyers out of the market. And other buyers may ultimately find they can now afford less house than they could have a year ago.

Potential Mini-Crash?

With all the talk of rising prices, minimal inventory, and increased interest rates, some are wondering if this all adds up to a perfect storm, similar to what the industry saw in 2007, where the “bubble” burst and values plummeted. Opinions differ on this, so time will tell. Certainly, we are not in the same dire predicament we saw in 2007. Then, lenders had been too generous with their lending, the job market imploded, and most found they suddenly owed a lot more than what their house was worth. But it is worth watching the speed at which the interest rates rise, and the amount of available inventory heading into the new year, to see if any of those old patterns emerge.

Housing Trends for 2019: What they Mean for You

What does it all mean? If you are considering purchasing a new home soon, the housing trends for 2019 indicate now is the time. However, before you start calling real estate agents, make sure your finances are in order, your credit score is good, and that you know how much house you can afford. The worst thing you can do is buy a house you can’t afford, no matter how great the interest rates are now, or how high they are likely to climb. But by being aware of the housing trends for 2019, you can make the decision that is best for you.