What’s in store for the multifamily market for 2019? We check out the predictions so you don’t have to! Today we looked at a recent housing report by Zillow to see what the new year might have up its sleeve for the multifamily sector and we discuss some of their predictions (and our thoughts) in today’s BAM blog…
According to the Zillow report’s research, it looks like mortgage affordability may be on the decline in 2019. They note that although mortgage rates have remained lower than they were during the recession, that is poised to change this year. The 30-year fixed rate will hit 5.8% which hasn’t been seen since the ominous year of the Great Recession (2008). Zillow also notes that rising mortgage payments are bypassing home-value gains: all of this means that home-owners may stay put and it may also keep first-time home-owners from jumping into the home buying arena. That could mean renters holding onto leases instead of signing up to be a home-owner. What about home-owners who need to move but are discouraged by rising rates? They could elect to forego the new mortgage and sign a lease instead.
Rents on the Move
According to the Zillow report, the rising mortgage rates will affect what home-buyers can afford and who continues to rent. In turn, they say that rents which have dipped slightly will take a turn and start heading up. They do note that due to continued multifamily construction, rents aren’t expected to rise too far beyond income growth.
The Amazon Effect (Even for “Losers”)
The Zillow report noted that, interestingly, even cities not chosen for Amazon’s HQ2 may get a “win” from devoting planning and ingenuity when hoping to win the bid. They use the example of Atlanta, which lost the bid for Amazon’s HQ2, but that may now see another relocated company’s headquarters. With jobs and growth come the need for housing!
Home Value Growth Drops
Another interesting factor Zillow pointed out was that home value growth had slowed. In March of this past year growth was at 8%, while this year Zillow experts expect a 3.79% growth. The drop will offset rising mortgage rates somewhat, but will the fact that home value growth is slowing also be a deterrent for those considering buying? Higher mortgage rates and homes with less value may just be a good reason to stay in a lease.