With 2017 coming to an end, many debates whether to take a step forward into homeownership in the year 2018. While the housing market is unpredictable, here are a few factors to look out for in the 2018 housing market: (1) market trends, (2) location, (3) supply of affordable homes, (4) law and regulations, and (5) the Federal Reserve’s policies
(1) Market Trends
Since the housing market crash of 2008, there has been a steady increase in home prices. According to Forbes, within the last two years, home prices have risen from about 5% to 6% per year on average. Additionally, there is a chance that home prices will continue to rise slowly but surely in 2018. As Forbes stated, in the year of 2011 there was evidence of a fairly stable growth rate proving the housing market isn’t in a bubble, indicating a healthy market.
(2) Location
When reviewing home prices, there are variations between one city to another. Seattle, Portland, and Los Angeles have astonishingly high home prices, while cities such as Boston, New York, and Washington, D.C have lower home prices. Additionally, factors such as population growth, geographical characteristics, crowded transportation, infrastructure, and regulatory concerns housing prices as well.
(3) Supply
Appreciation in national home price has made it challenging for many prospective home buyers to purchase a home. A large segment of homes continue to be out of reach, which leads many current homeowners in the direction of not selecting to trade-up. With this challenge, the supply of lower-priced homes has reduced the supply of starter homes that attract most-time home buyers. For first-time buyers, this challenge leads to unfavorable environments such as increased rent and home prices. For many Millennials who are interested in purchasing a home, they frequently do not have the financial means to purchase a home. The lack of supply leads to a tough argument for those who can, in a sense, afford to buy a home.
(4) Laws and Regulations
The outcome of the Great Recession was new regulations and a changing mood in the lending industry. As a result, Mortgage lenders replaced the looser lending criteria, which they once used with a tightened lending criterion. With this change, the number of prospective borrowers who are approved for a loan has been reduced by remarkably amount; this is bad news. Many consumers, who wish to purchase a home at the moment, have been shut out of the market due to credit concerns. However, with this bad news comes good news meaning ending standards will eventually be relaxed, allowing some reasonably qualified people to enter the market.
(5) Federal Reserve Policies
Although many expect the mortgage rates to increase in 2018, as the Federal Reserve continues to tighten monetary policy and implements the plan to reduce its balance sheet, it is not clear when the increase in rates will occur. This lack of clarity is the caused by speculation on how long it will take the Federal Reserve to utilize those monetary policies.
If you plan on purchasing a house in the year to come, these unpredictable factors should be taken into consideration, the choice of purchasing a home depends on your individual circumstances.