Real Estate Market, Report, Update, Statistics - Bill Salvatore, Realty Excellence East Valley - Arizona Elite Properties 602-999-0952

5 Housing Trends for 2018 Include Increased Inventory

When will we see a balanced Real Estate Market?

family standing beside SOLD sign in front of home - happy home sellers, happy home buyers, SOLD home - Bill Salvatore, Arizona Elite Properties 602-999-0952 - Arizona Real EstateOur market is just beginning to pick up for 2018 after the usual holiday falloff. I haven’t yet seen evidence of increased housing inventory here in Arizona, but I am cautiously optimistic that the experts know what they’re talking about.

An extended lack of inventory generally results in artificially increased home prices which might at first appear to benefit home sellers. But that’s not necessarily the case this time. Our post bubble-and-burst economy has produced a new breed of over-cautious consumers and the recent lack of housing inventory has discouraged many home buyers to the point of delaying their home purchase. This in turn forces home sellers to put their own plans on hold until the market picks up again.

Contrary to popular belief, desirable conditions are neither a seller’s market nor a buyers market, but a predictable market where home prices progress in a natural 6% to 7% increase year over one year. From observation and experience we know that the only healthy Real Estate market is a balanced one.

Realtor.com did a little digging for their National Housing Forecast and their research resulted in 5 projected housing trends for 2018. Predictions include increased resale inventory and a robust escalation in new home starts, a satisfying development for new home builders after a less than stellar 2017.

Easing of Inventory Shortage Expected in 2018.

Inventory constraints that have fueled a sharp rise in home prices and made it difficult for buyers to gain a foothold in the market will begin to ease next year as part of broad and continued market improvements, according to the recently released realtor.com® 2018 National Housing Forecast.

The easing of the inventory shortage, which is expected to result in more manageable increases in home prices and a modest acceleration of home sales, is being predicted based on developments first detected by realtor.com® late this summer. The annual forecast, which is among the industry’s bellwethers in tracking and analyzing major trends in the housing market, also foresees an increase in millennial mortgages and strong sales growth in Southern markets. The wildcard in 2018 will be the impact of tax reform legislation currently being debated in Congress.

“Next year will set the stage for a significant inflection point in the housing shortage,” says Javier Vivas, director of economic research for realtor.com®. “Inventory increases will be felt in higher priced segments after the spring home-buying season, which we expect to take hold and begin to provide relief for buyers and drive sales growth in 2019 and beyond.”

Realtor.com® Forecast for Key Housing Indicators

Housing Indicator Realtor.com® 2018 Forecast
Home price appreciation 3.2% increase, enabling a sales pick-up
Mortgage rate Average 4.6% throughout the year and reach 5% (30-year fixed) by the end
Existing-home sales 2.5% growth, low inventory trend starts to reverse
Housing starts 3% growth in home starts; 7% growth in single-family home starts
New-home sales Increase 7%
Homeownership rate Stabilize at 63.9% after bottom in Q2-2016

5 Housing Trends for 2018

  1. Inventory expected to begin to increase – In August, the U.S. housing market began to see a higher than normal month-over-month deceleration in inventory that has continued into fall. Based on this pattern, realtor.com® projects U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015. Inventory declines are expected to decelerate slowly throughout the year, reaching a 4 percent year-over-year decline in March before increasing in early fall, after the peak home-buying months. Boston; Detroit; Kansas City, Mo.; Nashville; and Philadelphia are predicted to see inventory recover first. The majority of this growth is expected in the mid-to-upper tier price points, which includes U.S. homes priced above $350,000. Recovery for starter homes is expected to take longer because their levels were significantly depleted by first-time buyers.
  2. Price appreciation expected to slow – Home prices are forecasted to slow to 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 segment as more available inventory in this price range and a smaller pool of buyers forces sellers to price competitively. Entry-level homes will continue to see price gains due to the larger number of buyers that can afford them and more limited homes available for sale in this price range.
  3. Millennials anticipated to gain marketshare in all home price segments – Although millennials will continue to face challenges next year with rising interest rates and home prices, they are on track to gain mortgage market share in all price points, due to the sheer size of the generation. Millennials could reach 43 percent of homebuyers taking out a mortgage by the end of 2018, up from an estimated 40 percent in 2017. With the largest cohort of millennials expected to turn 30 in 2020, their homeownership marketshare is only expected to increase. “Millennials are a driving force in today’s housing market,” adds Vivas. “They already dominate lower price home mortgage and are getting close to overtaking older generations for mid- and upper-tier mortgages. While financially secure in general, their debt-to-income ratios have started to increase as they compete for higher priced homes.”
  4. Southern markets predicted to lead in sales growth – Southern cities are anticipated to beat the national average in home sales growth in 2018 with Tulsa, Okla.; Little Rock, Ark.; Dallas; and Charlotte, N.C., leading the pack. Sales are expected to grow by 6 percent or more in these markets, compared with 2.5 percent nationally. The majority of this growth can be attributed to healthy building levels combating the housing shortage. With inventory growth just around the corner, these areas are primed for sales gains in years to come.
  5. Tax reform will be a major wildcard – At the time of this forecast, both the House and Senate had bills up for consideration, but neither had passed and their impact was not included in the forecast for 2018 sales and prices. Since then, the House has passed its tax bill and the Senate bill is likely to be voted on soon. While the ultimate impact of tax reform will depend on the details of the plan that is finally adopted, both versions include provisions that are likely to decrease incentives for mobility and reduce ownership tax benefits. On the flip side, some taxpayers, including renters, are likely to see tax cuts. While more disposable income for buyers is positive for housing, the loss of tax benefits for owners could lead to fewer sales and impact prices negatively over time with the largest impact on markets with higher prices and incomes.

Next year, home prices are anticipated 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 to 5.60 million homes due in-part to inventory increases, compared to 2017’s 0.4 percent increase or 5.47 million homes. 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.

Source: realtor.com® Reprinted with permission from RISMedia. ©2017. All rights reserved.

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eMail: golfarizona@cox.net
Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management


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