Are you thinking about buying a home in 2018? You’re not alone. Let’s take a look at where the housing market stands today and what to look for this year.
Home Prices on the Rise
It’s quite likely that home prices will continue to rise gradually in 2018. According to the National Case-Shiller Index, the national home price appreciation over the last six years looks quite normal relative to the previous 40 years indicating a healthy market.
Supply, Demand, and Changing Demographics
There are several factors causing a bottleneck effect in the home buying process we would have seen in the past.
The national home price appreciation we’ve seen of late has made this a challenging time for prospective home buyers in many markets, including those who already own a home.
With a greater portion of homes out of reach, more people are opting not to “trade-up.” This chokes the supply of lower-priced, starter homes that appeal to first-time home buyers.
We can see this direct correlation between Baby boomers staying and aging in place and causing a lack of starter homes for Millennials who are entering the market as first-time buyers.
With rising rents, rising home prices, and stagnant wages, Millennials are approaching prime home buying age, but often do not have the financial situation that would allow them to purchase a home.
The lack of inventory makes it a difficult proposition even for those who can theoretically afford to buy a home.
Mortgage Interest Rates
Many people expect mortgage rates to increase in 2018 as the Federal Reserve continues to tighten monetary policy and implements the plan to reduce its balance sheet. However, the increase in rates has been predicted for some time and it’s not clear when it will actually occur.
No one can predict the future, but we can make educated guesses about what will happen to the housing market in 2018.