4 Game-Changing Real Estate Trends for 2018

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As 2017 winds down, we start looking ahead to the new year and what it may have in store for consumers and, in this case, home buyers. This year has been a tough one for buyers, especially first-time buyers, as home prices have continued to soar and available inventory has remained low.

Home prices have risen at an annual rate of more than 6% this year, and there does not appear to be any slowdown in the offing.

Demand from buyers is rising among the entry-level and mid-market segments, but available inventory is mainly perched at the higher end of the housing market. Rising costs for land, lumber and labor have made it tough on home builders, and the U.S. housing market continues to feel the effects of years of delayed new construction.

What does 2018 have up its sleeve? The pros at Realtor.com have identified game-changing developments that could reshape the housing market. Here’s the list.

Supply finally about to meet demand. Realtor.com Chief Economist Danielle Hale expects inventory growth to begin showing up in the fall, but continued lack of inventory will remain a problem for most of the year. Inventory growth is expected to be the result of more construction, but the downside is that initial growth is forecast to come in the mid-market for homes priced at $350,000 or more. Price increases are expected to rise an average 3.2% nationally year over year.

Millennials starting to make some moves. A strong economy is raising incomes among millennials, which gives them the ability to save a down payment and qualify for a heftier mortgage, even as they repay their student loan debt. Millennials could account for 43% of home buyers next year, up from around 40% this year. Mortgage loan rates have hovered between 4.00% to 4.25% for most of this year but could rise to around 5% by the end of next year, so savvy millennials will begin their searches early.

Southern homes are booming. Low real estate prices and lower cost of living have been attracting buyers to homes in the southern cities, and that trend is expected to continue in 2018. Compared to projected sales growth of 2.5% nationally, housing markets in Tulsa, Little Rock, Dallas, and Charlotte are tabbed to see sales growth of 6% or more next year. And when southern states’ inventories rise, sales are expected to grow even more strongly.

Tax reform. The impact of tax reform on the housing market is hard to pin down because the proposed legislation has been changing hourly. But if something close to the recent bill is enacted, higher priced homes would be affected most by the tax changes, especially in high-cost coastal cities, particularly in California.

For more information, visit the Realtor.com website.