Predictions for the Housing Market in the United States for 2018 and Beyond

Freddie Mac’s report, Looking Ahead to 2018, published on September 21, 2017, starts off saying, “The economic environment remains favorable for housing and mortgage markets. For several years, we have had moderate economic growth of about two percent a year, solid job gains and low mortgage interest rates. We forecast those conditions to persist into next year.” What this essentially suggests is that the housing market in the United States is likely to be a buyer’s market going forward, which many experts agree with.

ForecastSnapshotSource: Looking Ahead to 2018, Freddie Mac, September 2017

Freddie Mac’s report went on to say that the “primary driver of sales in 2018” would be new homes, with 1.33 million housing starts expected through the year, a rise from the 1.22 million starts in 2017. Total home sales are predicted to rise about 2% in 2018, from the 2017 levels.

A Buyer’s Market

Economists believe that the rise in housing starts, along with a slight increase in mortgage rates would help moderate the rise in home prices in 2018. In fact, according to Svenja Gudell, Chief Economist, in a report in November 2016, “As the number of homes for sale increases and home value appreciation slows, we expect the market to meaningfully swing in favor of buyers within the next two to three years.”

Of course, this prediction is based on expectations that there would be a significant rise in housing inventory, which would also help moderate the pace at which home prices have been increasing of late. Zillow goes on to predict that growth in home price would slow to 3% in October 2017.

On the other hand, Freddie Mac expects home prices to increase at a rate of 4.9% in 2018, which is still lower than the growth rate of 6.3% seen so far in 2017. Mortgage prices have also risen from their almost record lows in 2016.

According to figures released by the National Association of Realtors, the sale of existing homes is expected to increase about 3.5% in 2017, to 5.64 million, with another 2.8% rise in 2018 to 5.8 million. In comparison, the sale of new homes is predicted to rise 10.7% in 2017, from the 2016 levels, with another 8% jump in 2018.

housingMarketForecastSource: Home Advisors, The 2017 Housing Market Forecast

In recent years, however, the supply of new homes has been falling far short of the demand, despite the fact that brand new houses usually cost significantly more than existing homes, given that builders are not just facing challenges of rising prices of raw materials and problems in getting financing, but also facing shortage of labor and land.

According to an article on Business Insider, “The number of prospective homebuyers grew through the economic recovery, attracted by historically low mortgage rates and steady jobs growth. This demand, coupled with tightening inventories, created a favorable market for sellers.” However, with a rise in housing inventory levels predicted for 2018 and beyond, the scales definitely seem to be shifting in favor of the buyer.

What is Driving the Real Estate Market?

One of the most obvious reasons, possibly, that is driving home sales is expectations of home prices continuing to increase, thereby bring investors good returns on their investments. Apart from this, there are a few other factors that are likely to continue to drive home sales, such as:

  • Millennials looking for homes that would be perfect for raising a family.
  • Rising rental rates offering homeowners great returns on investment if they rent their property out.
  • Rising popularity of home flipping, with the easier availability of financing and support.
  • Real estate being a less risky avenue of investment than other market-linked instruments.
  • The improving US economy.
  • Rising demand for US real estate among overseas property buyers, including Canadians, according to a recent National Association of Realtors report.

hottestMarketsSource: Zillow Porchlight, January 6, 2017

And for those looking a piece of this lucrative pie, Knoxville, TN, offers some great choices for homes, along with excellent amenities and services within easy reach.