2018 Market Outlook, Trending Up

  • Mortgage rates could reach 4.6% or higher by the end of 2018.
  • Home prices are expected to rise by 3% to 6% over the next year.
  • Existing home sales are predicted to increase 2.5% and new home sales to 7%.

Here are some of our predictions about the 2018 housing forecast and why now is a great time to buy.

Mortgage Rate Rising in 2018

While there is no true way to guarantee any change in rates, there are a few great places to look for an indication. In December of 2017 FOMC (Federal Open Market Committee) chose to raise rates by a quarter of a point. During their press conference, they seemed optimistic about the economy and mentioned more raises would be possible in 2018.

The Mortgage Bankers Association also shared this view of rates increasing in 2018.

After several years of inactivity, 30-year fixed rate mortgages could finally see a rise from the current average rate of 3.9%. Due to a tight labor market, inflation rose 2.2%, which could be the reason mortgage rates go up. Mortgage rates are predicted to reach 4.5%, even 5% by the end of 2018.

Now is still a wonderful time to purchase as rates are still great!

Housing Inventory Forecast

Limited inventory has shaped a large rise in home prices and bidding wars in certain markets for home buyers. A year ago this time about 175 million homes were for sale which was 6.4% down from 2016 numbers.

However, it’s predicted to ease up in 2018, due to market improvements toward the end of 2017. Some cites that get a shout out for “most-likely-to-have-inventory-increases” are Boston, Detroit, Kansas City, Nashville, and Philadelphia. Overall home inventory numbers are expected to increase by early fall of 2018.

Existing Home Sales

The housing inventory has decreased year-over-year basis over the last 29 months.

In the U.S. the monthly supply of homes has dramatically fallen in the last ten year (depicted in the graph below). The Y axis has the ‘Monthly Supply’ of houses while the X-axis shows the different years.

Home Sales Graph


In August 2017, the U.S. housing market started seeing a higher than normal month-over-month in inventory carried through the fall. From this pattern, the U.S. yearly inventory is projected to see a positive uptick by fall 2018. The bulk of this growth is anticipated to have U.S. homes priced above $350,000.

After five years of this tighter housing supply, there may be some relief soon.

New Home Production and Sales

An increase in new construction homes is largely accredited for the rise in inventory. October of 2017 saw a 13.7% increase in housing starts or newly constructed homes.

Relief won’t come immediately. The inventory challenges are considerable, and just as it took time for the shortage to reach its peak, it will also take time to equalize the market.

Keep in mind that each area of the country is a bit different when it comes to inventory levels. Some hotter markets like Nashville, Tennessee or Lakeland, Florida still show signs of increasing prices.

Talk with a professional to see what the conditions look like in your area of the country.

Millennials & First Time Homebuyers

It’s now 2018 and millennials are growing up, starting families, and buying houses. What does this mean for the housing market? Much like their baby boomer parents, millennials will have a profound impact on housing in the U.S.

Even though millennials may face challenges with rising interest rates and student debt, they’re on their way to making up 43% of homebuyers with a mortgage by the end of 2018. Increasing by 3% from 40% in 2017.

By 2020 the largest group of millennials will turn 30. After this time, their home ownership market share is expected to increase even more. Burdening millennials from becoming the majority of First Time Homebuyers is their student debt. However, down payment assistance loan programs can help!

Demographic Breakdown

Where to go from here?

As we go about chasing our New Year’s resolutions, the housing market will start to see more changes. If you’re considering buying a house soon, now is the time. Rates are still near historic lows, and it sounds like a flood of new buyers will soon enter the market.

If you have questions about the housing market contact your local Mortgage Consultant today!



Sources:https://www.marketwatch.com/story/why-its-so-hard-to-forecast-home-prices-for-2018-and-why-that-should-worry-you-2017-12-19 https://www.forbes.com/sites/billconerly/2017/09/20/housing-forecast-2018-2019-declining-new-demand/#23095bab58c6 https://themortgagereports.com/33787/housing-market-forecast-experts-weigh-in-on-2018-real-estate https://www.realtor.com/research/2018-national-housing-forecast/ https://www.housingwire.com/articles/41922-here-are-6-housing-predictions-to-know-for-2018 https://www.inman.com/2017/12/19/8-experts-predict-what-the-2018-housing-market-has-in-store/ https://onqfinancial.com/home-loans/down-payment-assistance/ https://www.globalpropertyguide.com/North-America/United-States/Price-History https://fred.stlouisfed.org/series/MSACSR#0 https://www.zillow.com/research/zillow-group-report-2016-13279/ https://www.inman.com/2017/11/30/inventory-uptick-slower-price-growth-expected-in-2018/  https://www.reviewjournal.com/business/housing/inventory-for-home-buyers-across-us-at-20-year-low/ https://www.washingtonpost.com/news/where-we-live/wp/2018/01/08/experts-weigh-in-on-what-the-2018-housing-market-will-bring/?utm_term=.23a8d1448a79


About the Author

Before opening On Q Financial in 2005, John Bergman originated and funded 450 units a year as a loan officer. He founded the company with just $1M of personal life savings—committed to his vision for building the best independent mortgage organization in the industry.

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