Sellers will remain in the driver’s seat this year as buyers continue to face affordability issues due to low housing supply.
“The challenges for buyers in the market haven’t changed that much from last year” said Keith Gumbinger, Vice President of mortgage website HSH.com. What’s more, home loans are expected to get more expensive as the year progresses.
Here’s what home buyers and sellers can expect from the housing market during this year:
Homes Will Remain In Short Supply
The supply of houses will still not be able to keep up with the demand this year, experts predict. And the homes that do hit the market will sell quickly.
A balanced housing market tends to have about six months of supply, according to Nela Richardson, Chief Economist at Redfin. In December of last year the market had less than three months of supply and homes were selling five days faster than the year before!
Richardson expects 3% more sales this year compared to 2017, but competition will be tough.”First-time buyers are going to have to juggle a lot of balls,” she said. “As long as we have an inventory shortage we will have bidding wars.”
The good news is that home building is expected to have an increase of 10% this year to reach around 1.3 million new single-family homes, according to Lawrence Yun, Chief Economist for the National Association of Realtors. But that’s not enough to keep up with the fast growing community.
Builders have been focusing on the more profitable “luxury market” during the housing recovery. But Gumbinger expects them to shift more down-market. “They have been shifting toward more middle-market and starter homes,” he said. “Rather than the 3,500-square-foot home, the focus has been more lower cost.”
Home Prices Will Slow
Home prices have risen exponentially in a lot of housing markets, especially those with thriving job markets. Experts expect the values of homes to continue to rise nationwide… but at a slower pace.
“Prices can’t go up at the pace they have been in those hot markets forever,” said Gumbinger. “Because of the difficult in affordability, sales will slow in those marketplaces.”
Richardson is expecting a 6% increase in home prices nationally this year while Yun predicts a more temperate 2% gain.
Yun believes Southern states like Texas, Florida, and Georgia could possibly see stronger home price appreciation as Americans continue to seek more affordable housing and strong job markets.
Loans Will Get More Expensive
After sitting below 4% for much of the year 2017, mortgage rates are expected to rise.
“This will be the year mortgage rates make some measurable increases,” said Yun. “Not anything significant or alarming, but it could hit 4.5% by year end, and that will tame some of the home-buying enthusiasm.”
Mortgage rates have already crossed the 4% threshold this year, hitting 4.04% just recently.
“Be as prepared as you can,” recommends Gumbinger. “Get your credit as high as it can be, get your loan paperwork in order and easy to get to.”
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