The National Association of Realtors (NAR) predicts a strong 2018 for home sales, but inventory shortages and upcoming tax reform could have a major impact on the market.
NAR’s Chief Economist Lawerence Yun presented his 2018 housing and economic forecast along with Ken Rosen, chairman of Rosen Consulting Group and UC Berkeley’s Fisher Center for Real Estate and Urban Economics, at the 2017 Realtors Conference & Expo in Chicago this past weekend.
Yun estimates that existing-home sales in 2017 will finish around 5.47 million, which is the best since 2006 when sales hit 6.47 million, and slightly above last year’s 5.45 million. In 2018, Yun forecasts sales to grow 3.7 percent to 5.67 million and home prices to rise 5.5 percent.
“Despite considerable demand all year, pending sales have lost a step in recent months because low supply is pushing prices higher and making homebuying less affordable in several parts of the country,” said Yun.
One of the main barriers to sales now and potentially in the future is low inventory across the country compared to overall demand. A decrease in new home construction is also constricting supply. This is causing homeowners to stay put longer before selling, keeping inventory low and hurting affordability.
“The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent,” said Yun. “Despite improving confidence this year from renters that now is a good time to buy a home, the inability for them to do so is causing them to miss out on the significant wealth gains that homeowners have benefitted from through rising home values.”
Yun is estimating that single-family housing starts will increase 9.4 percent to 950,000 starts next year, which is still below the 50-year average of 1.2 million starts. He also believes mortgage rates will gradually climb toward 4.50 percent by the end of 2018.
“An overwhelming majority of renters want to own a home in the future and believe it is part of their American Dream,” said Yun. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.”
|2015||2016||2017 Forecast||2018 Forecast||2017/2018 Percent Change|
|New Single-Family Sales||501,000||561,000||606,000||690,000||13.9%|
|Median Existing Home Price||$222,400||$233,800||$246,900||$259,000||4.9%|
|Median New Home Price||$294,200||$307,800||$315,500||$323,500||2.5%|