At the start of 2017, industry experts were projecting slow price growth, home inventory would bottom out and mortgage rates would climb. They were right with the home inventory forecast. According to Zillow, there are the same amount of homes available for sale as there was back in 1994. The only problem is since 1994 years, there are 63 million people living in the US. It’s not that lack of new listings that is the problem, it’s that there are so many more buyers for the same number of listings 20 years ago.
If you were in the market for a new home in 2017, you knew that the market was rather complicated. On the outside, with headlines of “Sellers Market” and “Home Prices Rising” it appeared as if the market was red hot and the perfect time to sell your home and move to another. Those who had a house to sell and successfully went through with the transaction knew that finding a house to replace there’s was not an easy task.
Now that there is a better understanding of the true market and why it appeared that there is a seller’s market the better part of 2017 but lack of inventory lead to this speculation, industry experts have started their predictions for 2018 and beyond.
For 2018 it appears that low inventory will trickle over from 2017, which in turn will keep house prices up and non-luxury type homes selling at a high clip, which will continue to make home buying for first time home buyers difficult. New construction will add around 600,000 new homes, which is only around 65% of the historical average. Many current homeowners will look to instead sell their homes and instead re-invest and renovate their current space to meet their housing needs.
Everyone’s favorite generation, the Millennial’s, are getting a year older and now in their mid 20’s and early 30’s. Home ownership is getting high on their priority list. In the second quarter of 2017, the home ownership rate was 63.7%, which was up from the all-time low of 63.1% from the same time in 2016. 2017 closed out with the number of new owner-occupied households exceeding the number of new renter occupied households. If this number keeps increasing like it is trending in 2018, it’s only going to be bringing in more buyers for lack on inventory which is going to increase house prices.
Throughout 2017, according to Zillow.com, the median value for all homes, whether they are listed or not is $200,000. Nationally the median home sale price was $261,800. The Twin Cities average sale price for homes in the $100k-$300k range was $201,875 just to compare. Expect the average numbers both nationally and locally here to keep increasing throughout the year.
The forecast for mortgages rates throughout 2018 should continue to stay under 4% like they did throughout the previous year. As long as there is investor confidence in the U.S. government, the rates will continue to stay low. Despite a slight jump after the 2016 election due to investors pulling their money out of U.S. Treasury Bonds, the rates lowered down from just below 4% back to the 3.73% range they are currently at.
Numerous factors have gotten us to where the current state of real estate. Between the growth of our country, the drivers of demand growth, and a changing mindset of the Millennial generation, 2018 should look fairly similar to the 2017 market. Expect affordable houses to fly off the market, several current owners to chose to renovate as opposed to selling, and rental housing continuing to be an option for those who keep missing out on purchasing their first home.