Years ago, when I was running marathons my method was straightforward: run at a good pace all the way through and get a decent time. Then I read about the interval approach, where you run hard for eight minutes and then walk for two.
Not only did I feel better at the end of the marathon after running at intervals instead of flat-out, but my time was the same.
I recently thought that it’s not a bad analogy for our local real estate market and what to expect in 2019, which I believe will be another good year for both home buyers and sellers. The pace may be different – we may not be running as flat-out as in 2017 and 2018 – but in the end we’ll see solid performance.
Though the stock market, the China trade war and the expectation of additional Fed interest rate increases have made for some scary headlines, the truth is the glass remains more than half full.
Pennsylvania’s most recent unemployment rate is 4.2 percent and the demand for workers is finally pushing wages upward. For most homeowners in our state, the new tax law will end up being a positive influence – including the impact on mortgage deductibility.
On the federal tax front, the tax reform bill increased the standard deduction from $6,500 for individuals to $12,000 and from $13,000 to $24,000 for married couples filing jointly. It also not only doubled the per child tax credit to $2,000 but raised the income limits of who qualifies. Additionally, in Central Pennsylvania, most homeowners are paying well below $10,000 in property taxes, which is the cap on how much can be deducted from federal returns.
As for mortgage rates, we saw big increases in the cost to borrow and I expect the “new normal” to be 5 percent interest rates through 2020. Historically speaking this isn’t bad, but after a decade of being spoiled with low rates, it may shock our market.
However, when buyers look to get their mortgages, for 2019 both FHFA and VA conforming loan limits are increasing by 6.9 percent to $484,350 as of Jan. 1. Plus, Fannie Mae has a loan-to-value program allowing qualifying first-time buyers to make only a 3 percent down payment and a 5 percent down program for those who previously owned a home.
What it means
I believe the news for 2019 is primarily good for both buyers and sellers, though as with my marathon running, getting to the positive result may include some slower pacing.
The decline in home sales in 2018 as compared to 2017 was primarily due to lack of inventory and not interest. November stats confirmed that homes that do hit the market sold at a faster pace and for more money – 2.9 percent more in the Harrisburg area for a median price of $177,000.
Going into next year, experts I’ve talked to expect a 2 percent increase in prices and a slight slowdown in sales. For sellers, this means some patience will be in order, but at the end of the day with the proper marketing and pricing, your home will move.
For buyers, we expect more new housing inventory in the mid- to upper range of the market (it’s still not cost-effective for builders to construct smaller, less-expensive entry-level homes). For those looking for a first home, we expect some of the older millennials to start growing out of their first homes, creating some openings. Millennials will be the largest share of the home-buying market.
I think 2019 may also be a positive turning point for Harrisburg city home sales and other urban areas in our region. Not only are the price points attractive for first-time buyers, but the sea change in the way millennials think about cars and transportation is significant. Ride-sharing continues to grow and younger buyers are not as wedded to having their own car as were past generations – which also gives them additional money for housing.
While some of the national headlines may be alarming, 2019 promises to be a good year for real estate in Central Pennsylvania, no matter which side of the sale you’re on.
If you’re thinking about buying that first home or are looking to upsize or downsize, the still relatively low-interest rates and the other factors I’ve mentioned make 2019 the right time to turn your housing dream into reality.
Greg Rothman is chairman of RSR Realtors and is the state representative for the 87th House District, which is in Cumberland County.