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How 2019 Housing Inventory Levels Will Affect Buyers and Sellers

The housing market in 2018 had its benefits for both buyers and sellers. Buyers were able to take advantage of lower interest rates toward the first half of the year, and sellers capitalized on skyrocketing home prices and the competition among buyers to snap up a smaller supply of homes for sale. As we move into 2019, some of these factors have shifted slightly, which will again affect buyers and sellers in different ways.

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Inventory Is Growing in 2019 - But Not by Much

2018 was marked by persistent inventory troubles across the country. It wasn't uncommon to hear stories of bidding wars and multiple offers on homes, which was thrilling for home sellers. The good news for 2019, at least for buyers, is that inventory is beginning to expand slightly.

The pace of sales has slowed a bit in some markets due to higher interest rates, and the number of homes being put on the market has gone up marginally, both factors that have stopped the inventory decline. According to Realtor.com, increases in inventory in 2019 will remain low at under 7 percent.

LA Times Blogger Bill McBride also discusses 2019 housing inventory in depth. According to McBride, who pulls NAR figures, inventory increased 4.2 percent year-over-year as of November. He expects more of the same level of increases (around 5 percent gains) in 2019 thanks to higher mortgage rates and negative impacts from the new tax law.

Still a Lack of Affordable Homes

Even though there are more homes available for sale, they may not be the right homes. The modest inventory growth that is expected in 2019 will occur in predominantly higher-end, or luxury listings. These are also taking place in certain metro markets that have higher paying jobs.

The biggest increases are expected in metro areas of Seattle, WA; Boston, MA; San Jose, CA; Worcester, MA; and Nashville, TN. Neighboring towns to these metro areas could also see significant gains in inventory in 2019.

Buyers who are looking for luxury homes will have more choices in 2019, depending on where they choose to live. There is one benefit for some sellers. A seller of an affordable home can still expect to get immediate attention and even multiple offers for their listing since the inventory of these remains scarce.

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Millennials Are Dominating Home Buying

Even though interest rates are continuing to rise and affordability is a challenge, Millennials will continue to make up a large portion of homebuyers in 2019. While some will be first-time buyers, there are many others that are classified as move-up buyers.

Danielle Hale, the chief economist for Realtor.com, reports that Millennials will account for 45% of mortgages in the coming year, compared to 37% of GenXers and 17% of Boomers.

The fact remains that a combination of factors threatens to price buyers out of the market and deliver less than desired to sellers. This includes the lack of available homes, the threat of higher mortgage rates, and lingering tax worries. As we move into 2019, buyers and sellers will get a clearer picture of how the new tax law changes will impact home affordability.