Predicting the future of anything can be a little dicey, and occasionally make us look silly. Remember Y2K? I mean, some people retreated to bunkers thinking the world was going to end once the clock struck midnight on the year 2000.

(It did not).

Making estimations about something like the housing market, though, is a little different. There are trends, data, and expert opinions that inform homebuyers and homeowners on what to except during a given time. Which is precisely what we lay out for the year ahead.

From a suburban living movement to a mortgage rate forecast, here are four housing market predictions for 2018.

Millennials will be making moves (to the burbs).

According to Zillow, millennials comprised 42% of all homebuyers last year – a big jump from previous years. In 2018, the trend looks to continue, but it won’t be in urban areas where most of them work.

According to Zillow’s chief economist Svenja Gudell, millennials will be trading in city life for suburban homeownership.

“Escalating land and construction costs – along with zoning laws – make it prohibitive for builders to add affordable housing in cities near jobs, so they [millennials] will look to the suburbs,” says Gudell. “As a result, that’s where millennials and first-time homebuyers will flock for the greater variety of homes at relatively lower prices.”

Housing demand will continue to exceed supply, but inventory will (finally!) increase.

If you plan to buy a home next year, this is probably music to your ears given how much of a seller’s market 2017 was. It wasn’t just beneficial to be a seller this year, it was the most profitable time to sell a home in almost 10 years! Inventory was low, competition was high, and sellers got the upper hand (and beefier pockets).

But alas, according to Javier Vivas, director of economic research at realtor.com, inventory will start to rise. “Realtor.com® projects U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015,” according to Vivas’ 2018 housing forecast. “Inventory declines are expected to decelerate slowly throughout the year, reaching a 4% year-over-year decline in March before increasing in early fall – after the peak homebuying months.”

Vivas also predicted that Boston, Detroit, Kansas City, Mo., Nashville, and Philadelphia will most likely see inventory recover first.

Homeowners will tap into their home equity in a major way.

As home values in most U.S. markets have increased over the last few years, more and more homeowners have enjoyed higher levels of equity. They’ve done home improvements, consolidated debts, and paid for college tuition in the form of a cash-out refinance.

And this trend, according to Freddie Mac, is likely to continue:

“If mortgage rates rise or remain flat, cash-out refinance activity will become an increasingly large share of total refinance activity. Typical cash-out refinances result in a loan amount around 3 to 5 times as large as equity cashed out. If cash-out equity extraction averages $20 billion a quarter, cash-out refinance activity would contribute about $300 billion worth of refinances each year.”

That’s a lot of refinancing.

Interest rates will rise slowly, but quickly make an impact on mortgage payments.

You may have heard that on December 14, the Federal Reserve raised its benchmark interest rate by 25 basis points – to a range of 1.25% to 1.50%. Translation: An improved economy and strong job growth continues to impact mortgage rates, which can affect your wallet.

According to Redfin’s chief economist Nela Richardson, the trend will continue in 2018, and may have an impact on mortgage payments. Her mortgage rates forecast:

“We expect the 30-year mortgage rate to inch up to between 4.3% and 4.5% in 2018,” Richardson wrote. “The combination of higher home prices (6%+) and higher interest rates means mortgage payments will be higher in 2018 for the same home. We expect an even higher increase – climbing as high as 15% - 20% – next year.”

These housing market predictions for 2018 may not be etched in stone, but with the expert analysis and data behind them, we think they’ll be areas to keep your eye on as we turn the page to another calendar year.

From predictions to trends, check out the top interior design and amenity trends we saw this year. Chances are, they’ll make a big impact on the real estate market next year, too.

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