Forbes Magazine Housing Outlook 2018: 6 Predictions from the Experts
Forbes magazine recently published an article with their predications for the housing market in 2018. The full article, summarized below, can be viewed at: Forbes
A Rocky Start
At the beginning of the year is predicted based mainly on the tax revisions recently passed by Congress and signed into law. Americans we need time to figure out how all of the provisions affect them. Several questions come to mind. Will they have more or less take home in their paychecks? How will the self-employed really be affected? What do the changes mean in terms of property tax deductions and interest deductions mean for them? Underlying demand will still push the market as will pent up demand from renters
Inventory will continue to lag behind demand
Data from at least one Real Estate Company shows that shows that in November 2017 there were 653,347 homes for sale across the country. In November 2010 there were 967,604. During that same period of time the population of the United States of America grew by almost 6%. So there are 33% fewer homes for sale and 65 more potential buyers.
Most experts agree that this low inventory is the driving force behind price wars and incredibly fast home appreciation.
The general consensus is that inventory will pick up slightly. The biggest reason for this modest optimism is that the current situation is unsustainable. Prices cannot rise faster than wages forever. Plus, life events, mainly an aging population, will eventually force reluctant sellers off the sidelines. New construction has started to swing away from apartments, typically built to rent, to single-family homes, which are built to own.
It would seem logical that a strong demand for single family homes, coupled with high prices, would entice construction, but this has not been the case in recent years. The high cost of land, shortages of skilled labor, shortages of building material, lack of buildable space and local regulations against density are all contributing to the shortage of new construction. In addition the aftermath of hurricanes and wildfires that wreaked havoc last year have also hinder new construction. Construction resources went to the places where it was needed most. This was necessary, but it contributed to the problems of builders elsewhere.
Home prices will continue to rise but perhaps at a slower pace
“Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth. Some of these favorable factors may shift in 2018,” noted David Blitzer, head of the Index Committee at S&P in the most recent release of the monthly reading. One thing seems almost certain is that the Federal Reserve will raise interest rates.
The rent versus buy equation could tilt toward renting in costly markets.
The new tax law has made it incredibly expensive to own homes in some areas of the country. Home prices have been rising faster than salaries and wages. This could mean that, for some at least, it is cheaper to rent than to own.
Mortgage rates will hover around 4%
Experts tend to agree mortgage rates will finish the year between 4% and 4.5%. They have been predicting this for several years now, so this may be the year it happens.
Millennial demand for housing will keep climbing
The generation of adults born after 1980 were slow to enter the housing market, but as a growing share of them get married and have kids they are buying homes at rates equal to their parents. In fact, single millennials are more likely to own a home than prior generations of singles.