2018 NATIONAL HOUSING FORECAST
Inventory constraints that have fueled a sharp rise in home prices and made it difficult for buyers to gain a foothold in the market will begin to ease next year as part of broad and continued market improvements.
The wildcard in 2018 will be the impact of tax reform legislation.
FORECAST FOR KEY HOUSING INDICATORS
Home price appreciation:
3.2% increase
Mortgage Rate:
Average 4.6% throughout the year and reach 5.0% (30 year fixed) by the end
Existing Home Sales:
2.5% growth, low inventory trend starts to reverse
Housing Starts:
3% growth in home starts; 7% growth in single-family home starts
New Home Sales:
Increase 7%
FOUR HOUSING TRENDS
Inventory Expected To Begin To Increase:
In August, the U.S. housing market began to see a higher than normal month-over-month deceleration in inventory that has continued into fall. Based on this pattern, realtor.com® projects U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015. Inventory declines are expected to decelerate slowly throughout the year, reaching a 4 percent year-over-year decline in March before increasing in early fall, after the peak home-buying months.
Price Appreciation Expected To Slow:
Home prices are forecasted to slow to 3.2 percent growth year-over-year nationally, from an estimated increase of 5.5 percent in 2017. Most of the slowing will be felt in the higher-priced segment as more available inventory in this price range and a smaller pool of buyers forces sellers to price competitively. Entry-level homes will continue to see price gains due to the larger number of buyers that can afford them and more limited homes available for sale in this price range.
Millennials Anticipated To Gain Market Share In All Home Price Segments:
Although millennials will continue to face challenges next year with rising interest rates and home prices, they are on track to gain mortgage market share in all price points, due to the sheer size of the generation. Millennials could reach 43 percent of home buyers taking out a mortgage by the end of 2018, up from an estimated 40 percent in 2017. With the largest cohort of millennial expected to turn 30 in 2020, their homeownership market share is only expected to increase.
Millennials are a driving force in today’s housing market. They already dominate lower price home mortgage and are getting close to overtaking older generations for mid- and upper-tier mortgages. While financially secure in general, their debt to income ratios have started to increase as they compete for higher priced homes.
Southern Markets Predicted To Lead In Sales Growth:
Southern cities are anticipated to beat the national average in home sales growth in 2018 with Tulsa, Okla.; Little Rock, Ark.; Dallas; and Charlotte, N.C. leading the pack. Sales are expected to grow by 6 percent or more in these markets, compared with 2.5 percent nationally. The majority of this growth can be attributed to healthy building levels combating the housing shortage. With inventory growth just around the corner, these areas are primed for sales gains in years to come.
SOURCE: REALTOR.COM
John Castelli, Realtor
(773) 851-7636
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