Mortgage rates expected to rise

Americans’ path to homeownership is likely to get more expensive this year, even as a severe shortage of homes for sale shows signs of easing.

Mortgage rates, which climbed through much of last year, are expected to continue to rise in 2019, driving up home buyers’ borrowing costs and shutting others out of the market. The projected result: a cooling housing market and falling home sales nationally.

“On the whole, it’s going to be more expensive for buyers next year, despite the fact that they’ll have more options,” said Danielle Hale, chief economist at Realtor. com.

The U.S housing market stalled in 2018 after a long period during which price increases outpaced income growth. That had been offset by historically low mortgage rates, but rates began rising steadily a year ago.

While still low by historical standards, the average rate on a 30-year home loan was 4.51 percent last week, according to mortgage buyer Freddie Mac. That’s up from 3.95 percent a year earlier.

Realtor.com and Redfin forecast the rate on a 30-year, fixedrate mortgage rising to 5.5 percent by the end of 2019. Zillow expects the rates will reach 5.8 percent. That would be the highest since the recession a decade ago.

A mere extra half percentage point can boost monthly payments and add tens of thousands of dollars in interest over the life of the typical 30-year loan.

“Rising mortgage rates will take a bite out of affordability on top of an already supplyconstrained and high-priced housing market,” Trulia senior economist Cheryl Young wrote in her forecast.

Higher mortgage rates have started dampening home sales. Sales of previously occupied U.S. homes in November were down 7 percent from a year earlier, the steepest decline since May 2011, when the housing market had yet to bounce back from the bust.

Realtor.com predicts that U.S. home sales will fall 2 percent in 2019.

It’s not all bad news for would-be buyers, though. Economists project that home prices will rise more slowly in 2019. Zillow’s forecast calls for prices to increase nationally by about 3.8 percent. Realtor.com has them rising at just 2.2 percent.

Another plus for buyers: The number of homes on the market is expected to continue rising, albeit from historic low levels. The inventory of U.S. homes for sale was up 4.2 percent as of November to 1.74 million units.