Right before the start of the new year, we compiled a few housing market trends from some of the industries most trusted sources for a blog called Experts Weigh In: 4 Predictions for the 2018 Housing Market.
Now, a quarter of the way into 2018, we’ve reevaluated those predictions to see what’s stayed the course and what’s gone in a different direction – amidst what has been a very busy four months for the housing industry.
What they said: Millennials will be moving to the suburbs.
“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.” – Zillow’s chief economist Svenja Gudell
What we’re seeing: The movement is, in fact, happening.
In the early 2010’s, city apartments owned by urban landlords reaped the benefits of millennials looking for affordable housing near their jobs. But now, that housing trend has shifted.
“Since then , the growth of urban cores has halved and exurban county growth has quadrupled…These suburbanization trends, while not yet at levels of the early 2000’s, seem to be associated with recent improvements in the economy and housing market that have lifted the constraints to suburban relocation among potential movers, including young adult millennial households. There is reason to believe the trend is likely to continue.” – Brookings
What they said: Housing demand will continue to exceed supply, but inventory will increase.
“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.” – Javier Vivas, director of economic research at realtor.com
What we’re seeing: Not so fast.
Perhaps the number of homes for sale will increase as the year progress, but as of right now there are still too many buyers chasing not enough homes.
“In February , there was a 3.4-month supply of existing homes nationally, the lowest on record for that month and substantially below a balanced 6-month inventory, NAR (National Association of Realtors) says. The number of starter homes is down 14.2% in the first quarter from a year ago, according to real estate research firm, Trulia.” – USA Today
What they said: Homeowners will tap into their home equity in a major way.
“If mortgage rates rise or remain flat, cash-out refinance activity will become an increasingly large share of total refinance activity.” – Freddie Mac
What we’re seeing: Cash-out refinances are on the upswing as interest rates rise.
As mortgage rates have climbed in 2018 (more on that next), homeowners are capitalizing on the benefits of a cash-out refinance.
“When rates are higher, borrowers aren't incentivized by lower rates. As a result, those who are still looking to refinance are doing so to cash out…It's not clear why the number of cash-out refis have increased, but these transactions make up a larger portion of the refinance mortgage activity largely because rising rates have prevented many homeowners from getting a lower rate.” – Investopedia
What they said: Interest rates will rise slowly, but quickly impact mortgage payments.
“We expect the 30-year mortgage rate to inch up to between 4.3% and 4.5% in 2018. 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 [in home prices] – climbing as high as 15% - 20% – next year.” – Nela Richardson, Redfin’s chief economist
What we’re seeing: Interest rates are rising steadily, and even outpacing some expert’s predictions.
In life, nothing is certain, but it does seem that rates won’t be getting any lower this year.
“Just months into the year, mortgage rates have already met 2018 predictions. In late 2017, when 30-year fixed rates were still in the high-3’s, economists put rates in the mid-4s this year. It didn't take long. Rates approached 4.4% by mid-February and shot past 4-year highs…Rates available now are likely the best we'll see in 2018, despite the recent push upward.” – The Mortgage Reports
So what do these housing market trends and expert predictions mean for you? Well, it depends on if you’re looking to buy a home or refinance your current one. And if that sounds like you, find out just how fast you can apply online for a home loan with us.