Housing Forecast

Outlook of the Housing Market in 2018

Whether you’re looking to buy or sell a home in 2018 – or find the perfect rental – it helps to know what you’re up against. Experts say timing will be paramount for homebuyers in the coming months, while sellers will likely have an easier time making a successful deal. Meanwhile, renters may find more amenities and negotiating power. The nation’s hot housing market could cool off this year as rising costs and tax-law changes discourage some buyers even as more homeowners put their homes up for sale.

In many cities, buyers haven’t been in the driver’s seat since the launch of the home price recovery in 2012. And there hasn’t been much relief for house hunters recently. In November, existing home sales hit an 11-year high despite just a 3.4-month supply of homes on the market, the lowest since 1999. The skimpy inventory has driven up the median home value by 48% since 2011.  In January, sales were disappointed and we’re into a lull, Corelogic expects 2018’s home prices will grow 4.3% by next December. And last December’s sales rose 6.6%. NAR and Realtors expect only a 3% growth in prices. Nevada, Washington, and Florida are the states with the best outlook, and perhaps the best places to buy homes or rental properties.  

Healthy job and income growth has fueled demand for houses, including from more Millennial first-time buyers. At the same time, many Baby Boomers are staying in their homes instead of selling and flocking to retirement havens. Investors — who buy houses to rent out or flip for a profit rather than to occupy —   also have held onto their property, reaping lucrative rents and sharp price gains, says Ralph McLaughlin, chief economist of real estate research firm Trulia. And new home construction has been curtailed by shortages of workers and available lots.  However things could be changing.  The climbing prices, combined with stagnant wages, are making purchases less feasible for many prospective buyers, Yun says. And after falling this year, 30-year mortgage rates should increase from 3.9% to near 5% by the end of 2018, Yun predicts, as the Republican tax-cut plan sparks a stronger economy and mounting concerns about the federal deficit. All that could curb home buying. 

“We expect the U.S. economy to continue on a solid growth path in 2018 and thereby further strengthen employment and eventually also wage growth,” says Metin Akyol, an economist with Zacks Investment Management. “This will be the largest driver behind the housing market in 2018 and will provide support for the ongoing increase in new home sales and existing home sales. As more individuals find themselves in employment for extended periods of time, consumer confidence will continue to rise (it recently exceeded pre-crisis levels) and will lead to increasing demand for housing.”

 

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