By Adrian Bishop
The shortage of homes for sale in the United States is set to reach a turning point in August 2018, market experts forecast.
This is set to influence prices, which are predicted to rise 3.2% in 2018, substantially slower than the 5.5% expected in 2017, according to the Realtor.com 2018 National Housing Forecast.
Realtor.com says, “Next year will set the stage for a significant inflection point in the housing shortage. Inventory increases will be felt in higher priced segments after 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.”
Nashville, Tennessee, is predicted to be the best market performer, with prices rising 7.67% in 2018, followed by Lakeland-Winter Haven and Palm Bay, both in Florida, on 7%. In fact, in general, the South is likely to see the strongest rise in prices.
However, the first cities likely to see a recovery in easing inventory include several Northern metros. They are Boston, Detroit, and Philadelphia, who are joined by Kansas and Nashville.
Existing home sales are likely to grow 2.5% and new home sales by an impressive 7%.
“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,” says the website.
“Mortgage rates are expected to reach 5.0 percent by the end of 2018 due to stronger economic growth, inflationary pressure, and monetary policy normalization in the year ahead.”
When combining forecasted 2018 sales and price growth in the largest US cities, Las Vegas, Nevada, comes out on top, with 4.9% sales growth and 6.9% rise in values. Dallas-Fort Worth, Texas, is in second place with a 6.02% jump in sales and 5.57% in prices and Deltona-Daytona Beach, Florida, with 5.47% in sales and 6% in values.
Among top trends for the 2018 US housing market are:
- Southern markets predicted to lead in sales growth – Southern cities are anticipated to beat the national average in home sales growth in 2018, due to healthy building levels combating the housing shortage. With inventory growth around the corner, these areas are primed for sales gains in years to come.
- Price appreciation to slow – Home prices are forecast to slow nationally from an estimated 5.5% in 2017. This will be most pronounced in higher value homes, as there is more choice and fewer buyers. 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.
- Inventory starting to increase – In August 2017, the U.S. housing market saw 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 turn positive by fall 2018, for the first time since 2015. Inventory declines are expected to reach a 4% year-over-year decline in March before increasing in early fall, after the peak home-buying months. Most growth is expected in homes above $350,000. Recovery for starter homes is expected to take longer because their levels were significantly depleted by first time buyers.
- Millennials to gain market share – Although millennials will continue to face rising interest rates and home prices, they are set to gain mortgage market share in all price points, due to the sheer size of the generation. Millennials could reach 43% of home buyers taking out a mortgage by the end of 2018, up from an estimated 40% in 2017. With most millennials expected to turn 30 in 2020, their homeownership market share is likely to rise further. Millennials are the driving force in the housing market.
Realtor.com uses data on the housing market and economy to estimate values for the year ahead. The forecast result is a projection for annual total sales increase (total 2018 existing-home sales vs. 2017) and annual median price increase (2018 median existing-home sales price vs. 2017).
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