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3 trends that will have a strong impact on the US housing market in 2019

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Prospective US homebuyers will see further erosion of housing affordability in 2019 as interest rates climb to a decade high, according to the latest market predictions from Dr. Frank Nothaft, CoreLogic chief economist.

Despite a growing economy and slowing price growth, some prospective buyers may be priced out by rising interest rates and forgo their buying plans all together.

These are the top 3 trends that will have the greatest impact on the overall housing market in 2019:

1. Economic growth

By most markers, the US economy is booming, driven in part by strong expansion and a thriving jobs market.

In fact, economic growth just needs to last seven more months to set the record for the longest expansion in US history, based on business cycle dates going back more than 160 years. Previously, the longest trough-to-peak cycle to date was the March 1991 to March 2001 economic expansion.

CoreLogic expects economic growth will be about 2.4 percent during 2019, a bit slower than the 3.1 percent we expect for 2018. Nothaft says that this still “should be” sufficient to push the unemployment rate to around 3.4 percent — the lowest unemployment rate in 50 years.

A low unemployment rate is good news for prospective buyers who may be searching for better paying jobs before they buy, but the expanding economy is not.

2. Interest rates

The thriving economy and jobs market will likely continue to push interest rates upward.

CoreLogic anticipates 30-year fixed mortgage rates will shoot up to an average of about 5.25 percent by December 2019 — the highest level in a decade. Interest rates last hovered around 5 percent in April of 2011 in the wake of the housing bust.

Rising interest rates have kept some Millennials out of the for-sale market. As affordability worsens, they’re choosing to stay renters, which is keeping the homeownership rate well below historic norms.

While we expect home price growth to slow to 4.8 percent annually in October 2019, adding in the expected rise in mortgage rates indicate the mortgage payments homebuyers will face by then will have risen by more than 11 percent. This is a larger increase than is expected for income, and thus affordability will likely deteriorate further,” Nothaft tells Livabl.

And while older buyers can recall a period when rates were higher, for Millennials a rate of 5.25 percent will be the highest of their lifetime.

“It’s really about perspective. When I was a first-time buyer, rates were over 10 percent. Millennials need to make a tenure choice. Do they want to buy or do they want to rent,” says Nothaft.

3. Home prices

Higher interest rates will have an immediate impact on housing and mortgage market activity.  

Homeowners who currently have low-rate mortgages will be incented to stay in their home rather than sell, keeping the new-listings flow relatively low.

“The larger monthly payments that come with higher mortgage rates will likely soften buyer demand, leading to less upward pressure on home prices,” says Nothaft.

Over the next year, CoreLogic forecasts price growth to slow by one percentage point to around 4.8 percent.

Nothaft says that the minimal decrease may not be enough to turn some renters into buyers as long as single-family home rents continue to be lower and more stable than home prices and interest rates.

Potential first-time buyers may decide to forego a purchase at this time, continuing to rent, and thus rental demand will continue to be strong, keeping rental vacancy rates low in most markets,” says Nothaft.

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New home? Prepare for the unexpected

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(NC) Buying a house, getting married or having your first baby are all major life events that are likely to affect your finances. But whether you’re in the midst of a major life event or not, it’s important to check in on your finances regularly to maintain good financial health.

Your financial health encompasses things like your spending, savings, borrowing and future financial plans. It also means dedicating a set amount of savings for unexpected future events. It can even include optional credit protection insurance, such as TD protection plans, to help cover your debt balances in case of death, a covered critical illness or total disability.

Even though it can be tough to think about the unexpected, life is unpredictable and it’s important to plan for the unexpected. Find more information at td.com.

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Mortgage pitfalls to avoid

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(NC) Throughout life, you may have moments where you’ll make a large purchase or invest in a costly item, like your family home. But whether you’re in the market for your first new property or already have a mortgage, leaving this asset unprotected can be costly.   

Insuring your housing financial debt, as well as debt for other big-ticket items like a new boat for your lakefront cottage or keepsake jewelry like an engagement ring, is a smart investment in your well-being.

To help protect your debt balances like a mortgage, your bank may have optional credit protection insurance products.

“Your home is one of your biggest assets, yet illness can happen at any stage of life. Worrying about your mortgage when the focus should be on health isn’t a situation anyone would wish for,” explains Shirley Malloy, vice president at TD. “Fortunately, we offer mortgage protection to provide coverage for your outstanding balance should you face a covered critical health event.”

Mortgage protection can be purchased whether you’re in the process of applying for a mortgage or already have a home financing solution. But what about protection options for credit card debt?

“Given the unprecedented circumstances of this year, many Canadians are trying to plan for the unexpected to protect themselves and their finances,” says Malloy. “TD balance protection plus is an optional product designed to help you deal with your credit card payment obligations in the event of a covered event, such as loss of employment.”

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Is your internet too slow? It’s probably not you

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(NC) We all know the aggravation of a school lesson that just won’t stop freezing or the family video call that looks more like a photo montage. And, as we adjust to the impact of COVID-19 on our day-to-day, that slow connection can have frustrating consequences.

Working from home and learning remotely, both need fast, stable internet, something not enough Canadians have yet. Even if you have fast devices in your home, if the infrastructure in your area is not optimal, your connection won’t be either.

Right now, cities have the infrastructure needed to ensure access. But rural and remote communities are hugely underserved, with fewer than half having high-speed internet, and fewer than a third of households on reservations have high-speed connections.

Fortunately, change is coming. The Universal Broadband Fund is backing projects across Canada right now to ensure the reliable, high-speed internet connections families need to work, study, access services online, and safely stay in touch with each other.

The fund existed before COVID, but as a response to the pandemic, its timetable has been moved up by four years to a target of 98 per cent of Canadians with high-speed internet access by 2026. With the faster pace, at least 90 per cent of us should be connected by the end of 2021.

The fund is focused on improvements in rural and remote communities across Canada to fix the disconnect between internet access for urban and rural households.  This means more remote work opportunities, better access to remote learning and safer access to healthcare, no matter where you live.

It’s not just for good connections at home, either. The improvements mean much better access to mobile networks on highways between remote communities. The result is better, safer navigation and access to emergency services for your family, even on the road in the middle of nowhere. Mobile projects will be focused on serving Indigenous communities and the roads leading to them.

The shape these improvements will take in your area will depend on where you live. Canada is huge, and its communities are hugely diverse, with diverse needs. Keep an eye out for local projects — they’re a small part of something much bigger.

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