Experts expect home prices to continue climbing in 2018

December 6, 2017

Housing experts expect home prices to climb 4.1% in 2018, based on the findings of the 2017 Q4 Zillow Home Price Expectations Survey, released on December 5.  That upward tick is higher than forecast: One year ago, experts predicted home prices would mount by just 3% next year.

The quarterly survey, conducted on behalf of the online realtor by Pulsenomics, asked more than 100 housing experts, market strategists, and economists about their expectations for the U.S. housing market in 2018 and beyond.

According to those in the know, limited inventory still will be a driving force in the housing market next year. America is in the middle of a supply crisis: The number of homes for sale has fallen on an annual basis for the past 33 straight months. Although building activity picked up slightly toward the end of the year, the biggest surprise of the 2017 housing market was the slow pace of single-family home building, according to the panelists.

Experts believe 2017’s low mortgage rates are likely to rise next year— to around 4.5% from the current rate of about 3.9%. The average 30-year fixed mortgage rate has hovered around historical lows for years, and is well below the% rates seen during the run up to the housing bubble.

“The American labor market is stronger than it’s been in decades and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes,” said Zillow Senior Economist Aaron Terrazas. “Home building has not kept pace with this surge in demand and remains well below historical norms. We don’t expect that these demand-supply imbalances will fundamentally shift in 2018: Demand will continue to grow and, though supply should increase somewhat, we still won’t build enough new homes to meet this demand, contributing to higher prices.”

He added, “Higher mortgage rates will eat into buyers’ budgets, putting even more price pressure on the most affordable homes for sale. Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market.”

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