The real estate market enjoyed a robust year last year. The value of the entire US housing stock increased by 6.5%, or about $2 trillion, meaning that the total value of homes in the US housing market was estimated at $31.8 trillion. The most valuable of the US housing market was the Los Angeles real estate market estimated at $2.7 trillion, followed by the New York real estate market valued at $2.6 trillion. Moreover, gains in home values were the fastest since 2013. The real estate market forecast for 2018 is looking promising with gains in home values to continue to increase. Construction efforts will increase as well and finally start to match people’s demand.
What does the real estate market forecast for 2018 hold? Today, our team of experts presents to you the real estate market forecast for 2018. As we explore the real estate market forecast for 2018, we hope that we help you make sound decisions with regards to any potential real estate investment opportunities. We hope that through our knowledge center at Mashvisor, you will have a clearer understanding of the US housing market, whether you are among the beginner real estate investors or an erudite.
2018 Real Estate Market Forecast: Mortgage Rates
The market forecast for mortgage rates is not looking promising, since mortgage rates will continue to increase. Analysts predict mortgage rates to average 4.6% throughout the year and reach 5% for the 30-year-fixed-rate mortgage by the end of the year. For comparison, in November 2017, the 3-year-fixed-rate mortgage averaged 4.07%. There remain, however, ambivalent predictions on the nature of the volatility of these rates. Some predict the growth to be slow and steady; others believe that the growth will volatile, dipping below 4% at least once, spiking above 4.7%, and then settling around 4.7%. Additionally, with Trump being in power, real estate analysts expect lending requirements to ease this year.
2018 Real Estate Market Forecast: Affordability
The market forecast for mortgage can be threatening. Rising mortgage rates can hinder many people from being able to afford purchasing a new home. Even the slightest increase in the hundredth digit of mortgage rates will lead to a significant rise in monthly mortgage payments. Luckily, according to studies conducted by the Urban Institute, the increasing mortgage rates and consequently interest rates will not greatly increase the affordability gap for the majority of homebuyers. Affordability, however, for young households will be affected the most; high rents and student debt loans have made it impossible to save up for a mortgage down payment amidst such rising mortgage rates.
Furthermore, in some states, affordability conditions with regards to price and income will most likely improve. In the five years prior to 2018, home prices rose 4 to 5 times the pace of income levels. When home prices are a lot higher than income levels, the affordability gap then widens. Only recently, the growth in prices and the growth in income are starting to align, therefore making homes more affordable.
2018 Real Estate Market Forecast: Property Inventory and New Construction Development
Since the Great Recession, short inventory of homes has characterized the US housing market. Although new construction efforts continue to rise, the pace of construction has not kept up with demand yet. Some real estate developers are downsizing properties in order to increase housing units, renters, and thus profit. Unfortunately, given the low inventory, property buyers are willing to compromise. Purchasing a house in a seller’s market can harm your real estate investment portfolio; we recommend that you hold off investing in property or look for one of the local buyer’s markets.
2018 Real Estate Market Forecast: Millennials’ Demand for Housing
According to real estate analysts, millennials’ demand for housing will increase in 2018. When millennials integrate further in the workforce, and their salaries grow, they become more comfortable at taking out bigger mortgages. Millennials are settling down and starting families, and are, therefore, buying more homes and taking out bigger mortgages. Based on mortgage originations actually, by the end of 2018, millennials could make up 43% of homebuyers taking out mortgage.
Studies have also shown that in 2018, millennials will lean more toward purchasing homes in urban suburbs such as West Chester, PA, and Arlington, MA. Because homes are slightly cheaper in the suburbs, millennials continue to move further out in order to afford to own.
2018 Real Estate Market Forecast: Baby Boomers and Generation Z
An apparent shift has been seen towards the renter group. Baby boomers who have now become senior citizens are downsizing from big luxurious houses to condos and smaller apartments. Some have even sold their homes and have opted for renting a new home as opposed to owning it. Baby boomers are slowly disintegrating themselves from the real estate market as they downsize their homes or even sell them and rent instead. As baby boomers exit the real estate market, a new generation begins to find its way in. Generation Z — generally accepted as those born between 1995 and 2001 — has been actively engaged in post-college housing market activity. These more tech savvy individuals have and continue to impose a tremendous impact on the tech and retail markets and are consequently heavily engaging in the housing market.
The US real estate market 2018 will foresee changes as an old generation exits the market and a new one enters it. Millennials, however, continue to grow their market share in real estate as they become a more integral component of society. Overall, the real estate market for 2018 will carry out some of the trends of that of 2017. If you are looking to get a mortgage, ensure to reach out to several banks to get the best rate.
For more information about trends in the US real estate market in the coming year and more housing market forecast of 2018, visit Mashvisor.