- The US housing market saw strong growth from 2017-2018, with home prices rising 5-6% nationally and inventory remaining tight. However, signs pointed to a moderation in the market in 2019. - Mortgage rates were forecasted to rise to their highest levels since the last recession, reaching 5.5-5.8% by the end of 2019, which would impact affordability. Housing starts increased in November 2018 but the composition was softer, with multi-family starts increasing more than single-family. - While the economic case for owning remained compelling in many markets, the changes to mortgage tax deductions and rising prices were causing some potential buyers to relocate to more affordable areas. Younger millenn

1. -> US Housing
Thoughts on the US Housing Market
Retrospective: November 2017 - March 2019

2. It’s a point of view not often heard in the United States. Although the U.S. homeownership
rate has been about 65 percent for the past three decades, lower than in many other
countries, our culture continues to value homeownership as a component of the American
Dream and a way to reach financial stability.
- Zillow “The Case For Renting”

3. Realtor.com and Redfin forecast the rate on a 30-year, fixed-rate mortgage will rise to 5.5
percent by the end of 2019. Zillow expects rates will reach 5.8 percent. That would be rates’
highest level since the last recession.
- Detroit News Dec. 2018

4. Where Is Housing Now?
In many markets in the US, the economic case for owning a home vs. renting is still fairly compelling. The NAHB home builder sentiment
index reached its highest level in history outside of 1999 in December, and the Fannie Mae home purchase sentiment index remains at
elevated levels. - NAHB
The level of housing starts increased to 1,256k in November 2018. However, the composition of the report was softer, as the volatile
multi-family category increased significantly but single-family starts declined. Building permits increased 5.0%, against expectations for a
slight decline, but the increase was also primarily driven by an increase in multi-family permits. - Goldman Sachs
In our eyes there is a slowdown and it is moderate. This is for many reasons but also due to changes in mortgage deduction tax amounts.
More and more potential buyers will be leaving expensive coastal areas and relocating. - HCG Global Research

5. Charting (From Feb. 2018)

6. 2017 - 2018
National Association of Realtors:
Housing Markets In The 4th Quarter ‘17
Five Most Expensive:
San Jose Metro, $1,270,000
San Francisco Metro, $920,000
Anaheim-Irvine, $785,000
Honolulu Urban, $760,600
San Diego-Carlsbad, $610,000
Five Lowest-Cost:
Cumberland, Maryland, $84,600
Youngstown Metro Ohio, $90,200
Decatur, Illinois, $100,000
Binghamton, New York, $108,900
Wichita Falls, Texas, $110,400

7. Housing Starts
The US differs regionally and in sub-regions,
housing and availability greatly varies
throughout the regions. The associated chart
shows the supply of existing homes and sales
of existing homes far eclipses that of new
starts. - HCG Global Research
The national median existing single-family
home price in the fourth quarter was
$247,800, which is up 5.3 percent from the
fourth quarter of 2016 ($235,400). The median
price during last year's third quarter climbed
5.6 percent from the third quarter of 2016
- NAR

8. Where Is Housing Now?
It turns out Millenials are buying homes but they are very different buyers and a lot will be entering the market
in 2019 as first time buyers

9. “Nationwide housing inventory will remain tight. Inventory has fallen almost non-stop for the past several years, and while several
pricey coastal California markets saw an increase the number of for-sale starter and trade-up homes last quarter, they’re likely to
be the exception and not the rule. And even if inventory begins to pick up in more markets, it will be rising from multi-year lows and
will take a long while to get back to a more balanced level between buyers and sellers. With the construction industry facing
significant headwinds from the higher cost of materials and labor as well as rising interest rates, we do not expect much if any
growth in new construction starts in 2019 to help alleviate inventory woes”
“Mortgage rates will continue to rise in 2019, reaching 10-year highs. Mortgage rates on 30-year, fixed rate loans have been less
than 5 percent since the end of the recession, helping to buoy housing demand and keep monthly payments relatively cheap even
as prices themselves rose. But those record-low rates will come to an end in 2019. Rising mortgage rates will take a bite out of
affordability on top of an already supply-constrained and high-priced housing market. Almost one in five (19 percent) renters who
wish to buy said rising mortgage rates were their biggest obstacle to home buying – up from 13 percent in April, before rates hit
seven-year highs”
“Looking ahead, consumers expect the pace of home price growth to slow over the course of 2019, which may temper growing
concern over housing affordability”
Outgoing Thoughts

10. Seasonally Adjusted 2018 Housing Data (U.S. census)

11. © 2019 HCG Global Research Co., Ltd.
http://www.hcgglobal.com
Sources:
U.S. Census, Goldman Sachs Global Investment Research, HCG Global Research, Trulia, Zillow, Fannie Mae, National Association of
Realtors