Newly released data from the Mortgage Bankers Association shows that 30-year mortgage rates are now firmly above 5%, and according to real estate giant Zillow, things are likely to stay that way in 2019.
According to Zillow, the 30-year mortgage will only continue to rise throughout 2019. Zillow is now forecasting that the 30-year mortgage will finish up 2019 around 5.8%.
And that’s good news for landlords, who will see increased demand for rentals as some people are priced out of home buying by higher interest rates.
Zillow made the predictions as part of its 2019 housing forecast, which it released on Wednesday.
In the report, Zillow says it is predicting rent growth, which has stalled in recent months, will pick back up in 2019 thanks to continually rising interest rates.
“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 writes in its forecast. “The recent downturn in rent appreciation will reverse course due to the additional demand on the rental market.”
Beyond mortgage rates rising to the highest level since the recession, Zillow is predicting that home prices will continue to grow, albeit at a slower pace than in years past.
Combine all of that and you have an even bigger squeeze on affordability than we have now, and that will likely keep people renting.
“The central storylines in the U.S. housing market didn’t change much over the past few years, but a series of emerging trends are setting up a much different narrative for 2019,” Zillow Senior Economist Aaron Terrazas said.
“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 continued.
“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 preferences and budgets. We as a nation are increasingly struggling to reconcile the places where we live or want to live with the places where we work, and infrastructure investment has failed to keep up,” Terrazas added.
“Going forward, job growth will begin to move beyond the handful of pricey, coastal superstar cities that have driven so much growth to date, and into more affordable communities with room to grow that are eager for the opportunity to shine,” Terrazas concluded. “2019 looks to be a pivotal year as the market cools and transitions from one marked by robust recovery into one more in line with historic norms and more balanced between buyers, sellers and renters.”