At the end of last year, mortgages were higher than they've been in nearly a decade, house prices were stagnating, and buyers were starting to take charge of the market.
We started the year with low mortgages rates, ballooning home prices, and a seller's market where inventory was near historic lows.
So what will 2019 hold for residential real estate market?
Higher mortgage rates: There is no reason to think that the Federal Reserve is going to stop raising interest rates as long as the economy stays hot. The Fed is looking to rein in inflation. The only way to do that is increase the rate that banks borrow money, which of course affects the price you borrow money at. The increases will be slow and incremental, but they will have a noticeable effect on home sales.
Home sales will drop: The bottom isn't going to fall out, but the combination of expensive houses and expensive money will make it a little harder for buyers to convince themselves to enter the market.
Millennials will keep buying houses; Boomers won't be selling yet: The two largest generations since World War II are colliding in the housing market.
The Baby Boomers are living in their homes, which means that they're not releasing their homes into inventory.
The Millennials, many of them the late children of the Boomers, are starting to enter the market en masse. There's not a lot of inventory to go around.
Home builders are still nervous from the crash of 2008 when so many of them took a bath with empty houses that they thought they'd be able to sell.
Inventory will grow, a little: 2018 was a terrible year if you were looking for a home you could afford in some areas. 2019 looks like it will have a bit more inventory. This is caused mostly by the fact that some potential buyers will be pushed out of the market by higher interest rates that will increase their mortgages to unsustainable levels.
Homebuyers will have less power: Homebuyers will lose some of their home buying power. Interest will suck up a higher percentage of the monthly payment they've budgeted for. This means they will need to look for a less expensive house. This will probably start driving prices down slightly as sellers look to meet the buyers in the middle.
2019 looks like it will be a pretty good year for real estate. Not breathtaking, but also nothing really horrible appears to be in store.