New Year’s Predictions for the Housing Market

By Bill Primavera – There have been times through the many years I’ve offered advice as The Home Guru when I’ve made New Year’s predictions about the housing market for the coming year, and there have also been times when I have been spectacularly wrong.

This year, I’m playing it safe and relaying 2018 housing predictions offered by Zillow, with far greater resources, namely from top economists and housing experts, including Zillow chief economist Svenja Gudell, who offers the following forecast for the industry on a national basis. I’ve added by own notations as they apply to the local market.

“We’re on the other side of the housing recovery, and the real estate market looks quite different than it did 15 or even five years ago,” Gudell said in a recent statement. “We have a huge generation entering the market. They really want to be homeowners, and they’re faced with an inventory crisis that leaves them with few options.”

“Builders won’t ignore this hungry market, and we’ll start to see a rise in new construction at the more affordable end,” she added.

“However, builders are also facing high costs, so instead of adding density in cities where zoning laws and land costs often preclude affordable building, we’ll see the suburbs grow and expand outward.”

While that may be the case nationally, I would make the obvious observation that, locally, new construction is limited, especially in upper Westchester, by the scarcity of available land.

Here are the six things Gudell expects to happen in 2018:

1. Inventory shortages will drive the housing market. Low inventory will continue to push up home prices which will serve as a barrier for first-time homebuyers. Locally, low inventory levels are very much the state of affairs and realtors are complaining that there are not enough houses on the market to show their buyer clients.

Gudell said there are 12 percent fewer homes to choose from nationwide than there were a year ago, and 51 percent of for-sale properties are in the top one-third of home values, which are out of reach for first-time buyers.

2. Builders will turn their focus to entry-level homes. Economists have said that increased residential housing starts, especially at the starter home level, are the key to bringing home prices down.

Housing starts have been well below the 50-year average of 1.2 million, but Gudell expects builders to finally hearken to the call of first-time and lower- to middle-income buyers yearning for more affordable options.

3. Millennials will move to the suburbs. The majority of millennials would rather live in urban centers with access to a plethora of entertainment and shopping options and robust tech-centered job opportunities. But most millennials, especially those without help from parents, can’t afford to live in these areas.

Gudell said 25- to 34-year-olds will begin moving to the suburbs in search of more affordable home prices.

Here in the upper Westchester and Putnam County areas, we find that a good percentage of our first-time buyers are coming from the city, many times either Brooklyn or Queens.

4. Many homeowners will remodel rather than sell. In addition to higher housing starts, experts have said more homeowners selling their homes would help alleviate low inventory issues. Homeowners, despite having high confidence about being in a seller’s market, will continue to stay still, according to Gudell.

Instead of buying a new home, homeowners will invest in remodeling efforts to make their current homes feel and look brand new. This has been evident locally as well.

5. Baby boomers and millennials will drive home design. Baby boomers and millennials are driving the housing market, so it’s no surprise that Gudell said they’ll be driving home design trends in 2018, too.

New starts and renovated homes will feature designs that appeal to both millennials and baby boomers, such as wide hallways that can accommodate both strollers (for young families) and/or wheelchairs (for aging boomers).

6. Homes prices will continue to grow, but at a slower pace. 2017 has been full of record-breaking home price growth, with economists calling it nearly “unstoppable.”

Gudell said home prices are expected to climb 4.1 percent in 2018 — 1.1 percentage points higher than the “normal” annual appreciation closer to 3 percent, but slower than the current annual pace of 6.9 percent.

But whatever the pace of growth, home ownership has always been, and will remain the most reliable investment any of us can make; that is a prediction to feel confident about for 2018 or any year.

 

While Bill Primavera has enjoyed careers as a journalist and publicist, he is now a Realtor® associated with William Raveis Real Estate, specializing in upper Westchester and Putnam Counties. To engage the services of The Home Guru to market your home for sale, call (914) 522-2076.