2017 was an interesting year for real estate. We saw record low inventory, a fast-paced spring market, continuous multiple offers, slow increase in mortgage rates and an increase in home prices. Experts from Realtor.com, Inman, and Housingwire agree the 2018 real estate market will have similar caveats as the 2017 market, but with some interesting twists. Here is our list of 6 predictions of the real estate market for 2018.
Inventory seemed to be the "it" word for 2017 in the real estate world. Many buyers had a hard time finding a home they wanted due to lack of houses on the market. Sellers saw the upside of this trend, with many homes seeing multiple offers or offers with no contingencies. However, potential sellers who wanted to take advantage of the market also became afraid of not finding the right home. This lead to a "chicken or an egg" conundrum. Low inventory ruled the 2017 market.
For buyers, there is good news. Although low inventory will still remain in 2018, it is predicted to slowly increase by 2.5%. Experts predict the scarcity of houses on the market will eventually reverse course, but it won't happen overnight.
2. Mortgage Rates
In 2017 we saw some of the lowest mortgage rates, leaving many experts baffled when they predicted much higher interest rates for the year. Mortgage rates are expected to rise 3-4 times in the next year and most experts believe the average will be 4.5% throughout the year and will rise to 5% by the end of 2018. For first time home buyers who are just entering the market, those numbers may seem high compared to the 3-3.5% we have seen in the past, but we are still at historically record-low interest rates.
3. Millenials Will Drive the Market
Millenial buyers are not a brand new trend to 2018. Millenials have had a large impact on the market the past few years, especially in the first time home buyer and starter home category. This picture will look slightly different in 2018. According to chief strategist of Realtor.com, Danielle Hale, millennials are still paying off their student loans, but they are having success in taking out varying mortgages, not just at the starter home level.
“They’re at that point where they’re seeing their incomes grow, and that will help them take on bigger mortgages,” Hale states. She notes this is largely due to the overall strong economy and their own career development.
It is expected for millennials to make up 43% of home buyers by the end of the year. Time to get your home HGTV ready.
4. Renovate to Sell
Resale homes are now competing with the increase of brand new homes that have entered onto the market - and buyers are paying attention. Making upgrades to your home before selling is now the norm. Unless your home is priced at a bargain, just slapping a coat of paint on the walls without having any upgrades in years will no longer work. Keep in mind, depending on the price range, your home is competing with model homes inside and out.
Having a pre-inspection and fixing any issues before listing your home is always a good idea and puts potential buyers more at ease. Buyers are more informed and educated than they ever have been before.
5. Slight Increase in Home Price
Home appreciation is expected to increase to 4% nationally in 2018. This is a slight increase from the "normal" annual appreciation of 3%, but quite a drop from 2017 where we saw an average of 6.9% increase nationally. Translating to houses becoming more affordable as the wide gap between home values and income levels start to finally close.
6. Micro Markets
Micro markets will continue to drive the real estate industry in 2018. Every street and every neighborhood is different. Sellers need to focus on what is happening in their own backyard and price accordingly. Buyers and sellers should understand that if a similar home sold a few miles away, it doesn't mean that's what their own home or the home they want will sell for.
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