While inventory constraints resulted in sharp increases in home prices, making it difficult for buyers to enter the market in 2017, the 2018 National Housing Forecast released by realtor.com predicts next year will see the nation's inventory shortage ease due to continued market improvements, with more manageable increases in home prices and a modest acceleration of home sales.
Realtor.com foresees an increase in millennials' share of the market and strong sales growth in Southern markets. The wildcard in 2018 will be the impact of the new tax reform legislation.
Here are five housing trends for 2018 projected by the official site of the National Association of Realtors:
1. Inventory expected to begin to increase. Realtor.com expects housing inventory to reach a 4 percent year-over-year decline in March 2018 before increasing in early fall after the peak home buying months. The cities of Boston, Detroit, Kansas City, Mo., Nashville and Philadelphia are predicted to see inventory recover first. Recovery for entry level homes is expected to take longer.
2. Price appreciation expected to slow. While the top 100 metros leading price growth in 2018 will be Nashville-Davidson-Murfreesboro-Franklin, Tenn. (7.67 percent), Lakeland-Winter Haven, Fla. and Palm Bay-Melbourne-Titusville, Fla. (both at 7 percent), and Las Vegas-Henderson-Paradise, Nev. (6.9 percent), home prices are forecasted to slow to an average of 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 areas as more inventory in this price range and a smaller buyer pool forces sellers to price competitively. Entry-level homes will continue to see price gains due to more inventory.
3. Millennials anticipated to gain market share in all home price segments. Realtor.com expects millennials to gain mortgage market share in all price points, due to the size of this generation. This group could reach 43 percent of home buyers taking out a mortgage by the end of 2018, up from an estimated 40 percent in 2017.
4. Southern markets predicted to lead in sales growth. Southern cities are predicted to beat the national average home sales growth with Tulsa, Okla., Little Rock, Ark., Dallas and Charlotte, N.C. leading. Sales are expected to grow by 6 percent or more in these markets, compared with 2.5 percent nationally, largely due to healthy building levels in these cities.
5. Tax reform will be a major wildcard. While many buyers will have more disposable income available for housing, the loss of tax benefits for homeownership could lead to fewer sales and impact prices negatively over time especially in high-cost markets.
Realtor.com anticipates home prices to increase 3.2 percent year-over-year after finishing 2017 up 5.5 percent year-over-year. Existing home sales are forecast to increase 2.5 percent compared to 2017's 0.4 percent increase. Mortgage rates are expected to reach 5 percent by the end of 2018 due to stronger economic growth, inflationary pressure, and monetary policy normalization in the year ahead.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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