WASHINGTON – May 21, 2019 – According to speakers at the National Association of Realtors®‘ (NAR) recent meetings, continued economic expansion, rising home sales and an increase in wage growth on par with home price growth are expected for the second half of 2019.
Three economic experts offered insights, including Dr. Lawrence Yun, chief economist at the National Association of Realtors, Danielle Hale, chief economist at realtor.com and Dr. Johannes Stroebel, associate professor of finance at New York University.
Yun predicts changing future migration patterns as buyers search for more affordable markets. Inventory in the U.S. has grown for eight straight months on a year-over-year basis, and Yun expects that to continue.
“Home sales should be much stronger based on the economic fundamentals of jobs, interest rates, population and consumer confidence,” says Yun.
After several years of home price growth outpacing wage growth, both are more closely aligned this year as average hourly wages accelerate.
“With strong job creation, wages are growing at a faster pace,” he adds. “Finally, wages and home prices are aligning. This is good news for employees.” He says this shift is a healthy development toward keeping housing affordability stable.
That said, Yun notes some other influences on the real estate market. Because of significant differences in home prices between metro markets, he says there may be a steady shift in the relocation of people and companies into more affordable regions of the country. Housing affordability had been falling according to NAR’s Housing Affordability Index.
“While affordability has been sliding, it is still better than we saw in the year 2000. This is due to much lower mortgage interest rates today,” Yun says.
Hale projects that year-over-year inventory growth will be moderate nationwide, noting that realtor.com saw listing prices rise 6.9% year-over-year in April. The Realtors Affordability Distribution Curve and Score produced by NAR and realtor.com shows that higher income households have more access to available inventory.
“We used to see home price growth only around the coasts, but now we’re seeing it throughout the country,” Hale says. “Nationwide, there are not enough affordable homes on the market, and those numbers have been declining.”
Stroebel discussed a recently developed paper on behavioral economics and housing, and his analysis went beyond data on jobs and home prices. His research evaluated how Facebook data and individual beliefs about the local housing market can influence friends’ purchase choices.
Is buying a house a good investment? According to Stroebel, people’s beliefs about whether buying a house is a good investment are driven by the house-price experiences of their friends. “Friends’ experiences are fundamentally related to personal beliefs of the housing market investments and influence personal behavior.”
According to Stroebel, having Facebook friends who experience a 5% increase in home prices over the past two years can increase the probability that a renter buys a home over the next two years by 3%. “Individuals do discuss property value with their friends, and this changes behavior,” he says.
Positive experiences were even shown to increase size of the home individuals purchased. “When home prices in socially-connected counties go up, it causes a reaction that changes home prices locally.”
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