Zillow has released their predictions for the 2018 housing market. The company, using an immense amount of data from their real estate portal, suggests that the market will continue to struggle with inventory.
The 2017 housing market has suffered from housing shortages, which have kept millennials from buying new homes. Shortages have also led to housing price spikes, making homes even more unaffordable for first-time homebuyers.
Zillow outlines a continued housing shortage that will result in 12% fewer homes nationwide in 2018 than in 2017. More than half of all of the housing inventory are in the top one-third of prices, which is expected to continue into 2018.
Builders will change their focus this coming year, according to the forecast. Builders are expected to realign their focus on entry-level homes to help alleviate the inventory crisis. The amount of new homes in the country have been historically below normal levels, with a higher focus on profitable homes.
Builders are expected to be forced into catering to a new, lower-priced market that is willing to get into a new home. Construction on homes geared toward first-time homebuyers is expected to increase this coming year.
Millennials will also be making a big change from urban areas to the suburbs. Areas, such as Carolina Forest, are expected to have an increase in building, as prices in bigger cities are too expensive. Builders, in an attempt to offer lower-priced homes, are expected to start construction in suburbs to help keep costs low.
Lower prices and a great variety of homes are expected to draw first-time buyers to the suburbs.
Homeowners are expected to stop selling and remodel their homes instead. The trend will keep housing inventory at low levels. Potential sellers fear becoming buyers in a tight market, causing them to remodel their homes which, when they do sell, will be priced higher as a result.
Zillow does provide good news for potential buyers. The company suggests that housing prices will continue to increase, but at a slower pace than it has in recent years. The price of homes is expected to rise 4.1%, which is still above the normal rate of 3%. A report from September shows that the annual pace of home price increases was as high as 6.9% in September.
Slower-rising prices will allow first-time buyers to save money for down payments without prices rising too fast and causing homes to be out-of-reach.
Kiplinger’s 2017 housing outlook showed that in 2016 home prices rose 5.8% compared to 4% in 2015. Kiplinger was off with their prediction that home price growth would slow back down to 4% in 2017.
Austin’s home prices rose 14.5% in 2016, as buyers flock closer to big cities in an attempt to be closer to good paying jobs.
Housing prices still remained lower than their peak before the housing bust nearly a decade prior. The report also suggests that the Trump Administration must emphasize new policies to help improve housing inventory levels, which has yet to be accomplished.
Tax proposals, with a focus on tax breaks, may make housing more affordable for new buyers, according to Kiplinger.
