“The typical Philadelphia home is worth no more today than it was one year ago,” writes Caitlin McCabe in her article, Philly region’s housing market in 2019, published in The Inquirer last November.
Real estate experts believe a slowdown of the region’s hot market will continue in 2019. We’re considering how some of the predictions listed in this article could affect real estate investors working with private lenders Philadelphia.
Interest rates will continue to rise, squeezing buyers and slowing demand
After three years of hovering around 3.x%, the 30-year fixed mortgage rate went from 4% to almost 5% in 2018. The Federal Reserve has been pretty clear that we should expect them to raise interest rates several times this year. “Obviously, the higher that rates go, the less people can afford to pay when they are out in the market,” says Aaron Terrazas, a senior economist at Zillow Research. The 30-year rate could be approaching 6% by the end of 2019. “I think that will be the major force shifting the housing market over 2019,” says Terrazas.
Some homebuyers will need to be looking for lower-priced homes. There’s an opportunity here for flippers to meet this demand. Less people being able to afford to buy homes could also increase demand in the rental market. Buy-and-hold investors can try to screen for better quality tenants, and they might also be able to rent out higher quality rental properties.
The single-family housing market will continue to cool — but not crash
Surprisingly home values did not go up in the second and third quarters of 2018 over the previous year, and this is why McCabe wrote, “The typical Philadelphia home is worth no more today than it was one year ago.” Aaron Terrazas from Zillow believes we’ll continue being in a seller’s market for 2019. We’re probably just seeing a slight correction in house values. Continued high demand and lower availability means investors will continue to have to work hard to find good deals. Successful flippers will be those who have developed a good working relationship with a hard money lender from among private lenders Philadelphia.
New construction will slow more than it already has
The Inquirer observes that housing starts have slowly climbed but still not fully recovered from the Great Recession and remain far below the early 2000s. The construction industry continues to deal with challenges and has focused on higher margins by building for buyers looking for their second or third homes. This means there is still a shortage of starter homes nationally and in Philadelphia. Flippers who can rehab distressed houses and resell at a price point attractive to these long waiting first-time home buyers will do well. Smaller margins, but higher demand.
The 2019 housing market predictions made by The Inquirer were mostly the continuation of trends real estate investors were already dealing with in 2018. Will every prediction here come true in the timeline described in this post? Maybe… maybe not. But we’re confident that we’ll see something long these lines in the next year or two. Therefore, the investors best able to deal with the changing market are those who are prepared for the changes, have enough reserves and liquidity to handle economic shifts, and have access to a hard money lender they can count on from among private lenders Philadelphia.