Experience from previous years and seven strong indicators offer a view into the crystal ball of the housing future.
It's that time of year when we reflect on the last 12 months, look dreamily out the coffee shop window, and think... "To hell with you, 2017! You were the [bleeping] worst. Let's hope 2018 isn't such a slimy armpit stain of a year."
It was a tough year for homebuyers, and lots of other people, too. Is there any relief in store? It looks that way. Just as many of 2017's highlights were actually brave and inspired responses to its ugliness, the tight housing market is forcing industry reactions that should help first-time homebuyers — like slowing price gains and more new starter homes for entry-level buyers.
If one of your New Year's resolutions is to buy a home, here's what experts are predicting about the housing market in 2018.
1. Home prices will keep rising, but not as quickly
Both Zillow and the National Association of Realtors expect home prices to slow their roll a bit in the coming year, which is welcome news for first-time buyers.
That doesn't mean they see prices falling, mind you, or even staying put. But 100 housing experts surveyed by Zillow expect home prices to rise by an average of 4.1% in 2018, while the NAR forecasts an even more modest 3.2% increase in home values. That's down from 5.5% annual growth in 2017.
So, your local housing market is unlikely to be any cheaper than it was last spring. But at least that dreamy Colonial on the corner won't spin out of your price range quite so fast.
2. Inventory is everything
Most housing economists say a lack of inventory — not enough homes for sale to meet demand — is the No. 1 reason prices keep rising like gangbusters. Indeed, the supply of homes for sale had fallen every month for over two years as of November.
The good news is, both Zillow and NAR expect more homes to hit the market next year — especially in the second half of 2018, and mostly in the form of new construction, with NAR forecasting a 7% jump in single family home starts. The first cities to see increased inventory will be Boston, Detroit, Kansas City, Mo., Nashville, and Philadelphia.
More homes for sale ought to ease buyer competition slightly, helping to contain the price hikes a bit and maybe even sparing you a bidding war or two.
3. Developers will build more starter homes, finally
New construction has lagged historic norms in recent years, and an astonishing amount of what has been built was at the high end of the market — because it offers builders a bigger payday. But Zillow expects that tide to turn next year.
For one thing, there's only so many luxury condominiums you can build before you saturate the market and, I presume, grow tired of searching the world for rare marble and installing custom wine fridges.
But beyond that, says Zillow chief economist Svenja Gudell, "Builders cannot and will not ignore a hungry market. They'll respond to the demand of more first-time buyers entering the market by increasing construction of new, entry-level homes." Hallelujah!
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