Predictions for the US Real Estate Market in 2018
The real estate market is a numbers game and has always been reliant on informed predictions to propel it forward. While the US real estate market has not always seen the rosiest of headlines in recent years, according to Freddie Mac’s September Outlook report, new homes are expected to be a “primary driver of sales in 2018,” with 1.33 million housing starts predicted next year—up from 1.22 million in 2017. So working within current patterns, total home sales are expected to increase about 2% from 2017 to 2018. This is good news for many, but it’s still important to re-member that old averages like 1.5 million housing starts a year is not currently the reality since drivers of demand growth aren’t favoring it. In other words, population growth is down, and av-erage household size is up. A moderate increase in mortgage rates will combine with this modest yet significant increase in housing starts, to temper the increase in home prices. Mortgage de-mands remain unchanged even as interest rates fall. Freddie Mac predicts a 4.9% increase in housing prices this coming year, less than the 6.3% price increase observed in the last year. “The economic environment remains favorable for housing and mortgage markets,” says Freddie Mac chief economist Sean Becketti.
As always, unexpected events are capable of changing forecasts for the future, and hurricanes Harvey and Irma are no exception. The hurricanes definitely weighed on homebuilding in Sep-tember and hurt sales of previously owned homes in the South, also slowing down housing starts and related activity. “The destruction caused by Hurricanes Harvey and Irma and the resulting disruption … are expected to be a drag on third-quarter growth,” said Jim Baird, chief invest-ment officer at Plante Moran Financial Advisors. “Nonetheless, the economy remains on track.”
In October, new home sales grew 18.9% to a seasonally adjusted annual rate of 667,000 units. That was the highest level since the same month in 2007 and came on the heels of the upwardly revised sales pace of 561,000 units in August. The quick surge was the largest since January 1992. Previous August sales were reported at 560,000 units. New home sales, which are drawn from permits, are subject to change from month to month. Those navigating the housing market this year have seen a lot of struggle in the form of home shortages, available houses for sale, as well as skilled labor, and appropriate land for building. In September, sales of new single-family homes in the US moved unexpectedly to a more than 9.5% year high in the Northeast, hitting their highest level in nearly 10 years, while sales in the South likewise hit their highest level since July 2007. There were also strong gains in the West and Midwest last month. With the sales surge that happened in September, the inventory of new homes on the real estate market remained at 279,000 units. At September’s healthy sales pace, it would take five months to get through the supply of houses on the real estate market, into 2018. This is down from the six months it would have taken in August.
A six-month supply is viewed as a healthy balance, halfway between supply and demand. Alt-hough there are many ways of forecasting and there are differing opinions on what remains to come in the real estate market in 2018, there is one thing most forecasters agree on: home prices will remain on the rise. Where forecasters sometimes differ, however, is just how much they will increase. While some claim a 3.65% increase, others indicate that home prices will rise by 5% by July of 2018. Either prediction is good news for real estate consumers and real estate agents alike, however, because both beat the substantial increase of close to 7% in 2016.
Buyers and sellers
November, December, January, and the upcoming spring real estate market of 2018 are expected to be very interesting. The economy is solid, trade deals look good, new construction is active, and recovery from the Texas and Florida hurricanes and the California fires is underway. Labor shortages and higher lumber costs are expected which could mean an increase in house prices and possibly fewer resale houses on the market. If you’re buying or selling, look further ahead and check out some factors that will affect the housing market for the next five years. US home pric-es are still being affected by some of the hottest markets, due to lack of houses for sale, a nation-al problem that’s been brewing for seven years and is at its worst in California. However, with the crisis brings great real estate opportunities for investors who put in the time and do their homework.
Homebuyers need to think outside the box to match their income and buying power with the high prices being sought out for homes for sale in popular cities like Boston, Los Angeles, San Francisco and the Bay Area, New York, Seattle, Denver, San Diego, etc. But according to ex-perts surveyed by Zillow, the US housing market power balance will shift from sellers to favor buyers by 2019.
A decade after “The Great Recession,” home prices have returned to their previous booming lev-els. But today's housing market is very different. Supported by stricter lending standards and a much more solid economic foundation, current price appreciation is driven by strong supply-and-demand dynamics with no signs of pre-recession era flipping or over-construction.
The most recent update on hot investments in the real estate market in 2018 (cities with an aver-age profit US-wide of $336,000) for sellers still has San Francisco, California right at the top of the list. Sunnyvale and San Jose are high too thanks to their very high rental prices, lack of hous-ing, lack of land, and levels of high pay. As well, an economy on the mend means there’s no chance of a bubble burst and no crash possible according to many. Despite talk of housing bub-bles, it’s a good time for sellers to put their houses up for sale, but tough for home buyers and investors. The Bay Area isn’t the only city with potential. Experts are predicting largely posi-tive forecasts of markets from Los Angeles and San Diego to New York, and Realtor.com named Vallejo, California the best city with the best outlook. Because home prices in the near-by San Francisco and Bay Area housing market are so high, buyers are willing to look a bit fur-ther to the North in Vallejo, for much more affordable (and even cheap) properties. For investors or buyers with less cash, the cities of Kennewick, Detroit, Fort Wayne, Modesto, Fresno, and Waco are offering the lowest prices on homes for sale. According to National Association of Realtors Chief Economist Lawrence Yun, the Chicago area housing market should pick up strength in 2018.
Reasons people are still eager to buy real estate
In spite of the risks involved, and the high prices in certain hot cities, many Americans are still very eager to buy real estate, and the market is in good shape in part because of this eagerness. The combination of high rent prices, appreciating home properties, young millennials with fami-lies of their own, and Gen Xers re-entering the housing market after foreclosures have created a perfect storm, which is why the real estate market of 2018 will benefit as a result.
Buying a home can be very stressful, particularly if you’re a first-time home buyer. It is likely the most significant purchase of your life, but the process is complex and can be overwhelming. Not to mention, foreign lingo and unexpected expenses do arise. To make your first-time home buy-ing journey a little less stressful, consult these tips designed to help you navigate the real estate market of 2018 more smoothly—and save money.