Real Estate Reporter

What to expect in 2019

There’s a lot less optimism for economic and housing performance this year
The stock markets might be taking the economy on a roller coaster ride in 2019. Photo: Paolo Ghedini

You can get dizzy reading even just a sampling of the headlines on articles previewing the 2019 real estate market: “2019 real estate market forecast: Power shifts to buyers.” “Forecasting housing in 2019: Not better for buyers, but not worse.” “Spooky forecast for real estate.” “U.S. housing market crash 2019 or 2020?” And “Tougher road ahead for home buyers and sellers in 2019.”

Go beyond the headlines, however, and the writers who are trying to crystal-ball 2019 are putting emphasis on different factors. Some of them might be wrong, some might be right, and some might be right but not applicable to our local market. My rule of thumb in trying to forecast what will happen is to stick to the basics: the overall economy, housing supply-and-demand, and interest rates.


The overall economy is, as of this writing, strong. We’re technically in what is considered full employment, with the unemployment rate around 3.7 percent. Some predictions have that inching up to about 4 percent by year’s end. Even more important for purchasers of homes, the stock market was quite strong for much of 2018. However, in December the markets began gyrating wildly. The Dow Jones followed its worst Christmas Eve drop ever two days later with its best one-day point gain — followed by more ups and downs. And on and on. I am the last person to try to predict the stock market, but I do know that instability is not good for business.

Will buyers hold off until they’re sure their investments will remain solvent long enough to provide a nice down payment (or, this being San Francisco, provide the entire purchase price)? Or have they socked away enough during the fat years that even if the market crashes or enters a sustained bear market that they can snatch up a home when it becomes available? Most likely, there won’t be any dramatic change unless there’s a market (and economic) collapse. We are overdue for a recession, and this one might be intensified by large debt loads carried by companies and individuals, as well as limited options available from the Federal Reserve and from the federal government, which is running massive deficits. Generally during the good economic years, governments should be paying down debt; but especially since the big tax cuts of last year, the U.S. government has gone on a spending spree unsupported by revenue. It doesn’t automatically mean we’re headed for a crash, but again it could intensify any downturn that comes.

There are not a lot of high hopes for the year over at Fannie Mae, one of the large government-sponsored entities fueling the mortgage markets (see “Party over at Freddie and Fannie’s,” Real Estate Reporter, Marina Times, July 2018). In its forecast for 2019, Fannie’s Economic and Strategic Research Group expects economic growth to slow (and to be followed by even more slowdown in 2020). “We expect full-year 2018 economic growth to come in at 3.1 percent — an expansion high — before slowing markedly to 2.3 percent in 2019 and 1.6 percent in 2020,” said Doug Duncan, Fannie Mae’s chief economist. “Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.”

Meanwhile, mortgage interest rates are expected to reach 5.5 percent in late 2019. For buyers and sellers in California, the forecast is cautious. “While home prices are predicted to temper next year, interest rates will likely rise and compound housing affordability issues,” said Steve White, president of the California Association of Realtors. “Would-be buyers who are concerned that home prices may have peaked will wait on the sidelines until they have more clarity on where the housing market is headed. This could hold back housing demand and hamper home sales in 2019.”

The national outlook is mixed. With rising interest rates, “monthly mortgage payments will rise 8 percent, putting home ownership more out of reach, especially for younger Gen-Z, Millennial and other first-time homebuyers,” notes’s preview of 2019 housing markets. “Upscale homes in high-growth markets, however, will provide more opportunities for buyers.”

Ah, yes, there’s the rub for buyers. San Francisco is a high-growth economy. However, it’s a low-inventory market, so those first-time buyers (or any-time buyers who aren’t deep-pocketed) will still find it difficult to buy anything in the city that isn’t a shed on wheels in someone’s backyard. predicts that nationally there will be only moderate increases in inventory, but “high-priced markets will buck the trend, with double-digit inventory gains.” Yeah — don’t expect to see that in San Francisco.


The folks at Rentcafe report that “cheap apartments” and “studios” were the most-searched rental terms in 2018, “showing that the interest in rentals was driven by a cost-conscious mindset this past year.” The company reported that average rent in San Francisco was $3,609, up 5 percent from a year earlier. (Nearby San Jose’s rents were an average of $2,723, up 4.5 percent.)

What will happen in 2019? Why do you even have to ask? Have tens of thousands of new units flooded the market and brought down lease rates? Then no, rents won’t be dropping appreciably any time soon.


Commercial real estate — which includes multifamily (for sale and rental), industrial, office, and retail — is a more diverse collection of subcategories than typical for-sale single-family  housing. An informal survey of industry predictions for 2019 shows quite a bit more optimism than in the general housing sector. Put differently, the headlines are a lot less schizophrenic.

You’ve probably seen the headlines about how the craze for online shopping, which is hurting retail establishments and landlords, is making industrial a hot business to be in as warehouse space is snapped up by shippers.

What about office real estate? Along with news that office transactions tanked in the third quarter of 2018 is the possibly related news that landlords and developers will be putting more money into nontraditional workspaces such as coworking environments.

And, finally, commercial real estate financing could be in for a shake-up, according to a report from the CCIM Institute, “Commercial Real Estate Finance Disruption: Deja Vu or Something New?” The institute’s chief economist, K.C. Conway, said, “It is not a matter of when, but how. We’re going to see a disruption in liquidity for commercial real estate lending as a result of accounting, regulatory, technological, and financial product shake-ups — many of which are not on anyone’s radar.” Visit to learn more.

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