Will 2019 by a good time to invest in real estate — or will you be better off parking your money elsewhere, whether that means sitting on the sidelines or an investment in an entirely different industry?

While no one knows exactly what will happen with home prices in 2019, if you have the right sources of information and know where to look, there is enough evidence to make a sound educated guess.

Let's explore this topic and see what we can learn.

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Will 2019 by a good time to invest in real estate — or will you be better off parking your money elsewhere, whether that means sitting on the sidelines or an investment in an entirely different industry?

While no one knows exactly what will happen with home prices in 2019, if you have the right sources of information and know where to look, there is enough evidence to make a sound educated guess.

Let's explore this topic and see what we can learn right after a quick thanks to our sponsor.

We've seen a slowing down in the housing market this year, in most of the metro areas around the country.  What’s causing this slowing growth in the housing market?  Well there are dozens of factors in play, but the ones with the biggest impact over the next few months and into the new year include the following five factors:
Factor #1. Affordability
The real estate industry is facing a basic economic problem: lots of people want to buy homes but can’t realistically afford to do so in their current geographic area. This is because affordability has become an increasingly acute issue over the past decade.

Remember that affordability describes the percentage of one's median household income spent on the median household mortgage in a particular area. Most financial experts suggest that households spend no more than 30% of income on housing, and many metro areas exceed that amount. Home prices, mortgage rates, household income, and local property taxes are all important factors in determining how affordable a certain metro area might (or might not) be.

Graphs charting the housing market have looked like a roller-coaster over the past decade: up and down, and since around 2012 to 2013, climbing back up again. But many markets haven’t been stable or steady, and that not only contributes to uncertainty — it also makes potential first-time home buyers less courageous about taking the plunge into home-ownership.  Many of these would-be first-time buyers still remember the housing crash of the last great recession back in 2008, that affected people for many years since.  So not everyone is in a rush to be a first-time home buyer right now.

And buyers who are ready to take the plunge are competing for a limited supply of homes for sale, which adds volatility to the market and can keep home prices high or cause them to rise, much like what we saw back in 2004.  This is especially true in areas where homes for sale are particularly scarce (Denver, Seattle, and San Francisco).

In some of those areas, the problem has become so bad that residents are spending much more than 30% of their household income on housing. Thirteen of the top 100 MSAs passed that critical barrier in 2017. In total, 30 of the top 100 are above 30% — 5 are above 50%, and there are some neighborhoods within these metros that top 70% of one's income solely for housing!