3 Real Estate Predictions for 2018

The 2017 real estate market veered heavily in sellers’ favor. But what about 2018? Experts predict that we will continue facing some of the same challenges as in years past, but with a strong economic climate, we may see more balance in response to buying and selling. Here are three predictions we expect to see in the 2018 marketplace.

1. Historically low interest rates will rise.

Many analysts find the low mortgage rates that have lingered throughout much of 2017 surprising. However, in 2018, these rates are likely to rise to 4.5 percent. In a panel of 100 experts

surveyed by the real estate website Zillow, most expected that mortgage rates will rise to 4.5 percent over the next year. This isn’t necessarily cause for alarm for sellers, however. Buyers typically don’t leave the marketplace until mortgage rates hit six percent.

2. Inventory may begin to increase.

One of the reasons that the past few years have been tough for buyers is because inventory — the number of new or older homes for sale — has remained low. Over the last 30 months, inventory

numbers on the marketplace have declined. This has often meant haggling between multiple buyers for a single property.

However, there may be hope on the horizon. The number of homes for sale is predicted to rise over the upcoming 12 months. One of the fixes, of course, would be more home-building, but this alone could not solve the problems. But one of the bright spots in housing inventory is that because of tax reform, homeowners will see less financial benefit, stalling the value of their properties to rise by only 2 to 4 percent this year. This means that homeowners may be more likely to sell. Other life considerations, such as downsizing or relocating, could put more homes on the market as well.

One of the continuing concerns that expands this problem is that buyers don’t list their homes until they have a new home to buy, which in turn limits inventory. Thus, it’s hard to know where this problem ends — or begins.

3. Income and home prices could be in better alignment.

Over the past five years, home prices have increased more quickly than income growth; specifically, home prices increased four to five times more quickly than income did. However, 2018

may be the year in which income growth catches up to home prices, making homes more affordable. But this may not be a long-term trend — while homes may be affordable now, increasing mortgage rates may not make this affordability last long.