Silicon Valley Projected to Post the Nation’s Largest Inventory Gain in 2019
November 30, 2018 | Source: Pacific Union Bay Area Real Estate Blog
- Nationwide, the number of homes for sale is forecast to increase by less than 7 percent by the end of next year, while the San Jose metropolitan should see a double-digit-percent gain.
- Home price appreciation in all major California metro areas is projected to outstrip the national average of 2.2 percent.
- Mortgage rate increases will drive up the average monthly payment by 8 percent in 2019.
While 2019 appears poised to be an even more difficult year for U.S. homebuyers, shoppers in Silicon Valley can at least take comfort in the fact that more properties are likely to hit the market.
That’s according to realtor.com’s 2019 National Housing Forecast, which projects that mortgage rates will increase to 5.5 percent by the end of next year, pushing the average payment up by 8 percent and making it tougher for younger buyers to get a foothold in the market. Inventory is expected to grow by about 7 percent, but company Chief Economist Danielle Hale predicts that most of the new supply will be at the middle and upper end of the market.
Expensive real estate markets are projected to see the nation’s largest supply increases next year, led by the San Jose metro area. Other costly areas that are expected to post double-digit-percent inventory gains include Seattle and Boston.
Even with more homes forecast to come to market, Hale does not see conditions tilting in buyers’ favor for at least the next five years. While the market remains slanted toward sellers, they can expect fewer offers and overbids and must price their properties competitively to maximize their profits.
U.S. home price appreciation is forecast to moderate to 2.2 percent in 2019. All 10 California metro areas for which realtor.com offers price growth estimates are expected to outpace the national rate, including 5.4 percent in Los Angeles and 4.2 percent in San Francisco and San Jose.
The tax-reform package that passed in December 2017 was partially responsible for the drop in home sales that immediately followed, and that trend is expected to continue in 2019, with nationwide activity forecast to decline by 2.0 percent. The San Francisco metro area should see sales dip by 0.6 percent next year, while activity will increase by 0.2 percent in San Jose and 2.2 percent in Los Angeles.
Despite rising prices and diminishing affordability, Hale expects that millennial buyers will account for the most purchases of any generation, at 45 percent of all mortgages. Millennial homebuying activity is forecast to top out in 2020, when the largest portion of that age group reaches 30.