Housing Experts Predict Further Price Growth In 2018
Housing Experts Predict Further Price Growth In 2018
The housing experts are predicting continued growth in 2018! Is there a home purchase in your 2018 New Year's Resolution?
Housing experts in the United State are increasing their expectations for home price rise to continue well into 2018 as growth shows no signs of slowing.
They predict that prices will rise by 4.1% next year, up from a forecast of a 3% rise a year ago, according to the latest home price expectations survey from real estate firm Zillow.
The quarterly survey from Zillow and Pulsenomics asked more than 100 housing experts, market strategists, and economists about their expectations for the housing market in 2018 and beyond.
The report points out that the nation is in the middle of a supply crisis as the number of homes for sale has fallen on an annual basis for the last 33 months in a row. Although building activity picked up slightly toward the end of the year, the biggest surprise of the 2017 housing market was the slow pace of single family home building, according to the panellists.
Looking at supply, only 16.7% expect the number of single family homes being built to change in 2018, a sign that limited inventory will still be a driving force in the housing market next year.
Experts believe 2017’s low mortgage rates are likely to rise next year to around 4.5% from the current rate of about 3.9%. The average 30 year fixed mortgage rate has hovered around historical lows for years and is well below the 6% rates seen during the run up to the housing bubble.
‘The American labour market is stronger than it’s been in decades and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes,’ said Zillow senior economist Aaron Terrazas.
‘Home building has not kept pace with this surge in demand and remains well below historical norms. We don’t expect that these demand and supply imbalances will fundamentally shift in 2018. Demand will continue to grow and, though supply should increase somewhat, we still won’t build enough new homes to meet this demand, contributing to higher prices,’ he pointed out.
‘Higher mortgage rates will eat into buyers’ budgets, putting even more price pressure on the most affordable homes for sale. Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market,’ he added.
The panellists were also asked to predict the 30 year fixed mortgage rate and the home ownership rate. They expect the current 30 year fixed mortgage rate of 3.92% to increase to between 4.28% and 4.7% and the home ownership rate currently at 63.9% is likely to stay around the same level, possibly increase to 64.2%.
Although unusual supply and demand dynamics will likely generate home value appreciation in the foreseeable future, most experts believe that the nation-wide rate of increase will diminish.
‘All but two of the 108 panellists who responded to this quarter’s survey expect weaker home value growth next year relative to 2017 and panel wide, returns are expected to average less than three percent per year after 2018,’ said Pulsenomics founder Terry Loebs.
He added that in a low inflation environment, nominal housing gains in the 3% to 4% level will still create home owner wealth at a pace exceeding the pre-bubble norm.
Despite the positive overall outlook concerning home values in the near to intermediate term, disparate views persist within the panel. The most optimistic group of experts projects average annual home value appreciation of almost 5% annually over the next five year to the end of 2022, while the most pessimistic group expects an average annual rate of just 1.4%.
‘I don’t foresee a stronger consensus emerging until we have greater clarity concerning tax reform and the pace of entry level home building,’ added Loebs.
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