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What’s In Store for the Housing Market in 2018

Feb 20, 2018 Mortgage Speak

We’ve just gotten started with 2018, but there’s been speculation about which way the housing market will go since well before the first of the year. As a savvy homeowner, it’s important for you to be aware of fluctuations in the market, especially if you’re thinking of buying a new home or making changes to your current home in the near future. Much of the predictions for this year are based on how the market fared last year, so we’ve gathered together a short year-end review of housing market high (and low) points from 2017, then turned to the experts for a glimpse at what the future may hold.

A Look Back
According to Realtor.com, 2017 was a fairly decent year for the housing market. Inventory continued to be in short supply, but not as badly as in previous years, causing brisk sales and shorter times on the market compared to 2016. The median existing-home price reached $248,000 in November — the strongest level in over a decade. Overall, though, sales and starts were flat compared to previous years.

If you bought last year, you probably got a pretty good price and an excellent rate, and avoided the changes predicted for the coming years. Here are additional highlights from 2017’s housing market:

  • Millennials. Despite the notion that millenials prefer renting over buying a home, more and more millenials are transitioning to homeownership; in fact, millenials made up about 40% of mortgage originations in 2017.
  • Renting. Prices rose on rental units, possibly influenced by the multiple hurricanes that hit our shores in 2017. Across the country, rents averaged a 2.9% increase, making homeownership look like a better choice for many.
  • Construction. New home sales hit a 10-year high in October 2017, and remained strong throughout the year. Multi-family starts were trending down, however, while single-family home starts have been relatively flat.
  • Mortgage rates. In 2017, we never hit the 5% rate experts were predicting at the end of 2016, despite the Fed raising rates by 25 basis points in December. At the end of the year, rates were actually down from a high of 4.3% in March. Both refinance and purchase rates kept to their near-historic lows in 2017.
  • Refinancing. Home refinances were down overall in 2017 but saw a bit of a surge toward the end of the year, possibly in reaction to the Tax and Jobs Act of 2017 lurching forward and turnover at the Fed being confirmed. These factors indicated uncertainty in the future of mortgage interest rates, which stayed very low throughout the year.

A Look Ahead
Experts predict an easing of the market for 2018, with inventories increasing and causing a slowdown in rising prices. The South is expected to be a strong market, and millennials will likely have ever-growing influence on housing trends across America. Entry-level-priced homes will still see price gains as more potential buyers flood the market, leaving high-end homes to languish or sellers to drop their prices to more competitive levels. Forbes, however, argues that changes to appraisal regulations will increase costs, which are passed on to the homebuyer.

If you’re buying with a mid-range budget this year, you may want to make your move early to avoid rising prices. Higher end buyers can wait until that end of the market is saturated, but beware of rising rates.

Sellers may want to consider adding features important to Millennials when preparing for the market, such as Internet of Things accessories and energy-efficient appliances, and have a robust online marketing plan in place.

Other possible trends to be on the lookout for in 2018 include:

  • Millennials. They gave the housing market a bit of a boost last year, and they’re expected to do even more this year, making up 43% of new home loans. Forbes expects their new ideas about homeowning, including co-living and tiny living, to affect how homes are marketed and priced.
  • Construction. At the end of last year, higher priced inventories began to pile up, which may force builders to turn to the middle-income market and shore up that inventory for this next year.
  • Tax and Jobs Act of 2017. We’re still seeing the effects of the Republican tax plan, which has had repercussions throughout the entire economy, and whose effects may not fully be realized except in hindsight. At the end of December, the National Association of Realtors was predicting home prices to rise only 1-3% across most markets, although high-cost areas may actually see a decline in prices because of the Act.
  • Mortgage rates. Rates are expected to continue their climb, possibly hitting 5% by year-end. Nasdaq, Freddie Mac, the Mortgage Bankers Association, and Kiplinger all predict moderate rate hikes.
  • Refinancing. Home mortgage refinances are expected to slow significantly throughout 2018, as the rise in rates has a chilling effect on the market.

Of course, no one can predict the future, and much of the talk around 2018’s housing market is based on patterns established over the past several — or many — years. But whichever way the market goes as 2018 marches on, there’s no need for guesswork when it comes to your home financing needs. To ensure you’ve got the best options for your situation, contact a BankSouth Mortgage loan officer today.

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