National Association of Realtors’ chief economist Lawrence Yun says home sales are likely to hit a 12-year high this year as builders race to meet demand for entry-level homes from first-time buyers.
While existing home sales are likely to remain flat this year, new home sales should top 667,000, which would be the highest number since the beginning of the financial crisis in 2007, Yun said last week.
Yun also said he expects a change in U.S. migration patterns as many buyers give up trying to find an affordable home in the nation’s pricier markets, and instead relocate to more affordable areas. These people may be encouraged by a growing housing inventory in many U.S. markets, which has led to affordability falling in some areas. Yun said he expects this trend to continue for the rest of the year.
"While affordability has been sliding, it is still better than we saw in the year 2000,” Yun said. “This is due to much lower mortgage interest rates today.”
One reason for the improved affordability is that incomes have been rising at a pace that’s faster than that of home price growth, Yun said. He cited data from Sentier Research that shows incomes have been climbing steadily since a post-recession bottom in 2011.
"With strong job creation, wages are growing at a faster pace," Yun said. "Finally, wages and home prices are aligning."
The mix of new home sales will shift towards the more affordable end of the spectrum, resulting in a lower median purchase price, Yun said. He predicts that the median new home price will fall by 2.8% to $317,000 this year. Further, he said new home sales will grow by 7.9% in 2020 to 720,000 units.
Prices for existing homes probably will gain 2.3% in 2019, and 3.3% in 2020, Yun said. That's a slower pace than 2018's 4.9% increase.