Last year was full of surprises for the housing industry, including rising prices and a record low inventory due to the slow progress of new home construction.
Learning from their mistakes in their miscalculations, experts are bearing all this in mind as they consider how the housing market will change during 2018.
Initially in 2017, experts believed that the housing shortage, which began at the end of the previous year, would become less of an issue as the months went on. In fact, the opposite was true, as inventory continued to decrease. By November, it was down 10.5 percent from 12 months before.
All this led to fast appreciation.
The likelihood is that inventory will improve somewhat this year, though only slightly. For one thing, construction is failing to pick up, despite the high home values. This is due to several factors, including land prices, a lack of labor and building materials, and problems finding space (in many cases because of local regulations regarding density).
The lack of inventory is far from a negative for everyone.
Homeowners looking to sell, especially those with the most sought-after types of homes, are in luck. The highest demand comes for mid-priced, single-family properties as well as starter homes and potential rental units. Sellers with these types of properties on the market have numerous potential buyers, provided they offer their homes at reasonable prices.
For years, we’ve been hearing about how Millennials are shaping the housing market. This generation is still a major defining factor as yet more Millennials seek to become first-time buyers. However, this year, there is a new group of prospective home buyers: Generation Z. Now finishing college and joining the workforce, some members of this generation are starting to look for their first homes — and further increasing demand.
Similarly, baby boomers are having an impact. The recession, combined with poor financial planning, meant that many delayed retirement and stayed where they were. Now, more baby boomers are thinking about their futures, which often means downsizing their homes.
Some baby boomers are looking for affordable housing, others are seeking luxury rentals. In either case, they are leaving homes of the perfect size for new families. The challenge is that many of these properties lack the amenities that Millennials and Gen Z buyers desire.
The tax bill contains provisions that impact mortgage interest deductions and property tax deductions. However, this same bill has many other financial implications. All this means that it will take prospective buyers time to recalculate their finances.
Many people will be hesitant to make any major decisions in the first few months of 2018. However, experts expect sales to pick up as the year goes on, in part due to the number of renters who have wanted to purchase a home for some time.
The housing market has been growing steadily for the last 23 months. When you consider the other aspects of the economy — we are close to full employment, there are changes happening at the Federal Reserve, interest rates are low — it seems that investors are becoming more conservative. All this suggests that we can expect the continuance of the slow growth of prices throughout 2018, both for new and existing properties.
Mortgage rates will increase to at least 4 percent and maybe as much as 4.5 percent (predictions vary according to who you ask) by the end of the year. Although they will be higher than they were throughout most of 2017, this is still a historic low.
Many trends this year suggest that it’s an ideal time to sell your home. Preparing for a sale means starting home improvements as soon as possible to increase the value of your property. To make your home appealing for a wider range of buyers, it’s a good idea to create a flexible space that can convert from an open floor plan to a closed floor plan and vice versa. Consider the benefits of using interior sliding glass doors to enhance the comfort and versatility of your home.
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