2017: The Fight to Find a Home. Will It Be the Same in 2018?
RE/MAX Co-CEO Adam Contos offers his perspective on what’s ahead for the 2018 U.S. real estate market.
A few weeks ago, as we wrapped December’s RE/MAX National Housing Report and looked back at the year, we noticed one glaring anomaly: there were no real anomalies for 2017. No real valleys and no big peaks other than the expected seasonal ebbs and flows. Throughout the year, so many of the key market indicators we analyze in the monthly housing report remained steady: tight inventories, rising median home prices and increased sales. This was all good news for sellers but bitter news for buyers - especially ambitious first-time home buyers looking to lay down roots.
And although inventory remains the primary storyline in the New Year, here are a few other trends we can expect for the 2018 U.S. housing market:
Inventory is Key. (Tired of hearing about inventory yet?)
1. Turn up the volume on new home building. Until that happens, we’ll struggle with low inventory and some markets will feature all-out bidding wars. In 2017, housing starts were down 2.9% year-over-year and well below the historic 50-year average. That hurts. Even though there’s a shortage of labor and a spike in material costs, the primary reason for the low starts is that builders have focused on more profitable, higher priced homes and multi-family residential construction. We can’t blame them, but we need more entry-level houses. We’d love nothing more than to see the next generation of home buyers start building equity now. We saw glimmers of hope at the end of the year as U.S. single-family homebuilding and permits began to surge. We’d like to see that trend continue.
Existing Home Sales on the Rise
2. Fueled by renewed consumer confidence, wage growth and an improving economy, existing home sales could increase and may even surpass record levels set back in 2006. What would slow us down? Any negative impacts on the stock market, even tighter inventories (there’s that word again), a repeat of 2017’s devastating hurricanes and fires or even the recently signed tax reform bill. Without getting too deep into the provisions of the tax bill that passed at year end, new restrictions on mortgage interest deduction and property tax deduction could deter some from buying homes in the country’s priciest markets. This could also deter some homeowners with existing large mortgages from selling. The changes to the standard deductions for both individual and married filers may also remove some of the incentive to buying a home nationwide. But we’ll wait and see what the real effects are of these provisions as buyers weigh their options with financial planners.
Changing Migration Patterns
3. Home buyers discouraged by affordability and low inventory (sorry, I had to do it) in certain cities, markets and states, will look to other, more attractive and more inviting neighborhoods. We expect to see more home sales in the suburbs, less-populated markets and even more affordable states. Cities that have the most effective transportation systems and those that promote high-ammenity, “walkable,” contemporary neighborhoods will benefit the most. We may even see some migration from large, expensive coastal cities toward the Midwest and South where home prices are lower.
Always the Unexpected
4. Gadgets, apps, online tools, skilled agents with killer technology. Anything that makes buying and selling a home more plausible and less stressful will continue to launch and evolve, especially in 2018. Consumers may not use bitcoins to buy a home tomorrow, but we’re open to the possibility. RE/MAX agents understand the complexities of a home transaction. That’s why we’re here. But, we’re all for streamlining that process by signing documents online, video chats with our clients and perusing open houses via virtual reality goggles. If it helps us get our buyers and sellers in a home, then count us in.
We’ll certainly see our share of challenges in 2018 (not saying the “i” word) but with the challenges will come ecstatic home buyers and sellers, new and booming communities (one boasting the new Amazon headquarters) and fresh innovations in real estate that we never saw coming. I say we get started.