Now that 2018 is here, it’s time to look ahead at what the year may bring for the real estate market in Houston and throughout the country. Though there’s no way to predict exactly what will happen, housing experts, economic forecasters, and folks like us can make educated guesses based on data and historical trends. According to reports, here’s what to look for in the coming year if you’re planning to buy or sell a home.
Urban Land Institute and PricewaterhouseCoopers predict a “soft landing”
According to the annual report released by the Urban Land Institute and PricewaterhouseCoopers, the real estate market in 2018 will be fairly smooth. They predict that moderately priced, single-family residences will remain in demand and offer opportunities for developers and investors. Their experts believe that our low unemployment rate coupled with new economic policy could lead to slow but steady growth in the market. They also think that the homebuilding industry will see a breakthrough in technological advances, such as 3D printing and prefab homes (we’ll see about that one).
Zillow highlights importance of inventory shortage
Zillow released their annual report, and according to their research, trends in 2018 will be dictated by an inventory shortage. There are 12 percent fewer homes on the market now than there were a year ago, which will drive prices up and make the market more competitive. Of the homes that are for sale, more than half of them are high-priced, which will lead to the construction of more starter homes. Most of the affordable properties that are built will be in the suburbs, so there will likely be an uptick of first-time homebuyers and Millennials moving to the outskirts of urban areas.
Of the new homes that are built, many will feature designs that are suitable for both young families and those nearing retirement. We’ll see more extra-wide hallways for strollers or wheelchairs, and frameworks that will allow for additions down the road. In addition, Zillow predicts that home prices will grow just over four percent.
Realtor.com suggests tax reform could dampen growth
Realtor.com’s National Housing Forecast for 2018 predicts that although the year could see gains in inventory and sales prices, tax reform could have a big impact. Their research suggests that by fall, year-over-year inventory growth will be positive, though mostly felt in mid- and upper-tier homes. Inventory for starter homes will likely remain stagnant due to high demand.
Their forecasts show a slowing in the appreciation of home prices, with growth at just over three percent. Millennials will gain a larger share of the market and will become more of a driving force. Cities in the south will likely see the most growth in home sales, which bodes well for Houston and other Texas cities.
In Houston, there will be 3 metrics to watch
Oil prices, interest rates, and Harvey demand will continue to be the metrics to watch in 2018 in Houston.
Oil prices helped to stifle homes sales at the beginning of 2016. Although we have saw a moderate recovery in 2017, the higher the oil price, the better for Houston real estate. Oil prices are now above $60 a barrel and any further increase could help spur the local market.
According to the Mortgage News Daily, the average interest rate on a 30 year fixed rate mortgage is 4.25% at the time of this writing. That is well off the 5 year high. That being said, interest rates have been on the rise of late. Although still well below historic averages, interest rates do have an impact on affordability. As interest rates rise, it dampen local growth. At what rate it becomes an impact on real estate activity is anyone’s guess. More than likely, we have a long way to go before this is an issue.
Inventory levels started to tick up prior to Harvey but then experienced a sharp decline as Harvey impacted neighborhoods were taken off the market. As these neighborhoods rebuild, new listings will start to enter the market. If buyers see Harvey as a one time thing, then this new inventory could help to moderate price appreciation in non-affected neighborhoods. If buyers are less open to Harvey impacted neighborhoods, those non-affected neighborhoods could see an increase in demand and price appreciation. More than likely, market recovery for Harvey impacted properties will be very neighborhood specific.
If you’d like more information about buying or selling a home in Houston in the New Year, please don’t hesitate to contact us. We look forward to helping you navigate the 2018 real estate market, no matter what it has in store.