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5 Predictions for the US property market in 2018

Predictions for property markets can sometimes be widely off key and the market in the US last year is a case in point. In 2017 none of the widely expected trends did as predicted and with this in mind, Forbes has turned its attention to this year. Based on what happened in 2017, the publication makes the following five predictions for the US property market in 2018.

A year of surprises

Forbes points out that 2017 was anything but expected. Major political events and dramatic weather conditions made it a year of surprises. Analysts generally believed that house prices would stop rising so fast, that more new-build construction would take place and that interest rates would rise moderately. None of these three forecasts happened.

According to Skylar Olsen, Senior Economist at a leading property portal, “inventory tightened, house prices rose and mortgage rates barely budged.” He also points out that although new construction did start to rise towards the end of 2017, it didn’t happen in the first-home market where “the new inventory is needed most”.

So, after a year of surprises, what does Forbes expect for 2018? The publication defines five clear trends, which broadly predict a similar pattern as was seen at the end of last year.

Trends for 2018

First of the predictions for the US property market in 2018 is slower sales in the first part of the year. Recent changes in legislation regarding mortgages and property taxes will take a while to assimilate. Forbes believes that sales will be slow as potential sellers and buyers do their calculations, particularly regarding deductions for mortgage interest and property tax.

However, this slow-down will likely affect the start of the year only. Underlying demand within the US property market is strong and shows every sign of remaining so in 2018. Wages have just experienced their highest rise since the crisis and renters continue to want to buy their own home.

Low supply

2017 was the year of low supply, so low that Forbes call it “a crippling lack of inventory” and “the defining trait of the housing market in 2017”. According to figures from one property portal, inventory levels stood at 10.5% in the year to November.

The experts believe the situation will improve slightly during this year. A recent survey carried out by another property portal found that 31% of Americans believe 2018 will be a better year to sell than 2017. New-build construction also increased towards the end of last year and current builder sentiment is high. The national builder confidence index climbed 5 points in December to reach its highest level since July 1999.

Prices will continue to rise

But not on the same scale as they did in 2017. According to the Case-Shiller US National Home Price Index, property prices rose by 5.92% in the ten months from January to October when price increases registered their 23rd consecutive month.

Forbes believes that as long as underlying economic factors stay in place – low unemployment and a strong economic scenario – property prices will continue to go up. However, given that the US property market in 2018 will have more inventory, prices will rise at a more leisurely pace.

Mortgage rates to remain low

Many analysts believed that 2017 would be the year when the Federal Reserve brought in mortgage interest hikes. There were in fact three interest rates during the year but these were marginal and as a consequence, mortgage interest only increased slightly.

General consensus is that mortgage rates will rise to 4 or 4.5% this year, higher than 2017 but still very affordable for the average homebuyer.

More millennial demand

The millennial generation (those born after 1980) is currently one of the largest population sectors for the US housing market. They’re big renters and also buyers.

Forbes expects the buyer market among millennials to be one of the defining characteristics of the US property market in 2018. After a decade of falling, homeownership is on the rise in the US. In Q3 last year it reached 63.9%.

This should continue an upward trend during 2018 as more millennials enter the buyers’ market. Although this generation takes longer to buy a home – most prefer to rent – statistically a higher percentage buy property than previous generations.

(Source: Forbes)

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