Housing market to flatten out in 2019: Barclays

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While a downturn is expected to come for the housing market, it could be more of a side-step than falling off a cliff, according to the latest Barclays Global Economics Weekly report.

Trajectories show a leveling off for housing activity in 2019 — pulled down by lower affordability with the Fed's forecasted tightening but buoyed by decreased home price growth and climbing income.

"Although it would not be surprising to see affordability deteriorate a little further if the Fed follows through on its planned tightening, this effect should be cushioned by the influence of accelerating wages on household income," the Barclays report said. "More broadly, we expect housing to be supported by the virtuous cycle of increased hiring, rising incomes and additional spending that continues to fuel the expansion."

October had the first year-over-year housing inventory gain in 10 years, according to Remax. The perennially inflating home prices that kept sales down also helped boost inventory. Overall, the market moves closer to equilibrium between buyers and sellers with demand and supply maintaining a balance.

"We expect demand from millennials and others to sustain a natural rate of starts in the vicinity of 1.25 million units, close to where the level of starts stands. This bodes favorably in comparison to historical housing downturns, where starts have typically ascended well above their natural level, leading to accumulating imbalances and subsequent correction," said the report.

Housing starts fell 2.9% year-over-year in October, a decline of about 37,000 units. However, it grew 1.5% month-over-month, adding roughly 18,000 units from September, according to the Census Bureau.

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Housing market Housing inventory Home prices Mortgage rates forecast Housing affordability Barclays Census Bureau Federal Reserve