Looking Forward to 2019 by Looking Back at 2018 Market Trends

Here’s a look at 2018 market trends that Zillow economists have identified and how they might impact your 2019 marketing strategy.

New home sales are down while inventory increases

New home sales have been declining since spring. In October, inventory of new homes for sale rose 4.3 percent from September — the largest monthly gain since September 2013 — and October inventory was up 17.5 percent from a year ago.

Material costs, which had been rising steeply for parts of 2018, may soften somewhat, but labor costs continue to increase as competition for construction workers remains intense. Existing home inventory is also increasing, giving buyers more options to choose from, though rising mortgage rates will shrink budgets and shorten the list of what they can afford.

For 2019

• Focus on the value of a new home versus an existing home. Reinforce the idea that a modestly higher outlay for a brand-new home pays dividends in construction quality, new appliances, less upfront maintenance and peace of mind.
• Make sure all your listings — regardless of what stage they’re in — are updated and available for home shoppers to discover during their search.

More first-time buyers enter the market in 2019

The 2018 Q4 Zillow Home Price Expectations Survey asked a panel of 114 real estate economists and investment experts for their predictions about the U.S. housing market and future home value growth.

Nearly half (49.5 percent) said they expect activity among first-time home buyers to increase somewhat or substantially in 2019 compared to 2018. A large majority (84.3 percent) of survey panelists said they expect the U.S. homeownership rate to be higher in two years than it is today (64.4 percent as of Q3 2018).

And buyers should face less competition from investors looking to buy homes to convert into rentals: More than 62 percent of the panelists said they expect individual investment activity to decrease somewhat or substantially. More than 50 percent of the panelists expect institutional home investment activity to also decrease somewhat or substantially.

The survey panelists also expect annual U.S. home value growth next year of 3.8 percent on average — down from 4.2 percent in the previous quarter.

For 2019

• Buyers — especially first-timers — need a trusted guide on their journey to homeownership. Get to know their needs and respond quickly when they reach out.
• Make an unforgettable first impression with your online listings by including plenty of high-resolution images.
• Double-down on your digital marketing in a downturn; you’ll stay ahead of competitors who cut their budgets, and you won’t have lost any ground when the market recovers.

Rising mortgage rates might cut into new construction sales

Home values aren’t growing at the same pace as mortgage payments, and that might limit what buyers can afford. The typical mortgage payment in August was up 15.4 percent from a month earlier, or $118 a month, while home values gained just 6.5 percent in that same period.

Decreased consumer purchasing power might restrict demand for certain types of housing, and homeowners may decide to stay put in their current home and maintain their monthly payment rather than take on a higher mortgage rate. These trends are expected to continue as mortgage rates keep rising into 2019.

For 2019

• As buyers face affordability challenges and increased inventory options, revisit your pricing and marketing strategies to stay competitive in a tight market.
• Show buyers where to get the most bang for their new construction buck: Amp up your messaging on available discounts, upgrades and promotions.