What’s in Store for Real Estate for the New Year? 2018 Housing Market Predictions
2017 was a bit of a wild ride with a listings shortage, potential legislation affecting the market, and an upswing in housing prices. As 2018 leaps and bounds quickly into existence, it is important to get up to date on the latest information about the housing market to prepare, set goals, and be well positioned for success.
Are you ready for the New Year? Here is our housing market forecast for 2018.
2018 Housing Market Predictions
On Mortgage Rates
It is expected that the average rate of 3.9 percent will rise — but by how much? A recent survey performed by Zillow by more than 100 industry experts forecast that rates will increase to an average of 4.5 percent for a conventional 30-year fixed rate mortgage, equaling out to around 60-70 basis points.
This still sits well within the affordability range for many homebuyers — well underneath that 6 percent marking point where buyers tend to exit the marketplace.
Lack of Inventory Continues
With high demand and continuing historically low inventories (particularly low levels of single-family home building activity), housing industry professionals need to stand strong and power through 2018 with creativity and flexibility. A repeated decline in the last 30 months totaling around 1.8 million homes will be offset some by housing starts, backed by an overall increase in home sellers for 2018.
Existing homeowners will still be the largest supply in regards to inventory in the housing market as builders continue to deal with labor shortages and a limited number of buildable lots.
Factors Affecting Affordability
Affordability is definitely central to the conversation when it comes to the housing market forecast for 2018. Everything from mortgage rates to wage growth and the latest legislation on tax reform will greatly influence the affordability factor. If the economy continues to grow, there will be an increase in the gap between income levels and home values.
The clear impacts of the “Tax Cuts and Jobs Act” is yet to be known, but many experts agree that changes to the mortgage deduction could have a significant impact on affordability — at least in the short term. The doubling of the standard deductions is very likely to threaten the appeal of homeownership as well. But dependent on wage growth, 2018 could very well see a decrease in the space between income and home prices.
Moving Forward With Millennials
Real estate professionals in title insurance, lending, construction and more always need to keep an eye out for new opportunities. Millennials and other first-time buyers represent a burgeoning space for growth, particularly in areas close to city centers. Townhomes and other housing in “urban suburbs” show real promise as new homeowners seek out amenity-rich, higher-density neighborhoods.
Low down payment options such as the FHA, local and state homeownership programs, and the VA will help to offset student debt and higher home prices. Also, as baby boomers continue to downsize, it will help to boost the inventory in the housing market too.
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