As the year winds down, many real estate agents are already looking toward the New Year, with leading indicators pointing to a stronger real estate outlook in 2018 including home construction stocks.

There also are indications that low mortgage rates will continue to stimulate home construction activity in the biggest metro markets.

From the high points of the early 2000s to the lows of the housing crash that kicked in full gear in 2008, agents have seen housing prices start to come full circle.

Despite some gloomy forecasts, some signs point to a market that is still healthy with plenty of growth potential next year and beyond despite high home prices in many cities.

According to the S&P/Case-Shiller U.S. National Home Price Index, property prices have reached a new high and are about 5 percent above their pre-crash peak. The index in 2017 reached a new high, approaching 200, underscoring that the bear market in housing which began over a decade ago has completed its work and a new long-term bull market is now underway.

Another barometer – the 20-City S&P/Case-Shiller Home Price Index – decisively entered into positive territory in 2012 and has been positive ever since.
The index also indicates that while housing prices have rebounded rapidly from 2012 to 2014, the rate of change has been more gradual over the last three years. Key drivers to this trend include an improving economy and stricter mortgage standards.

The downside for clients is that mortgage standards are much stricter. However, there are signs that lenders’ comments suggest that competitive pressure and more favorable guidelines for GSE loans have helped to bring about more easing of underwriting standards for those loans.

As a result, a barrier to entry for many would-be home clients is effectively being lowered, creating additional opportunity for agents.

The coming year won’t be without its rough spots.

Low inventory is the hidden force influencing every other housing market stat. It’s the reason that prices are up and why new listings are selling at an unprecedented clip.

“Everyone has been talking about tight inventory but I think we are OK calling it a straight up inventory crisis at this point,” says Svenja Gudell, chief economist at real estate data firm Zillow. “We just don’t have enough homes.”

According to a Zillow analysis, the current number of homes for sale is about equal to the housing supply in 1994. The trouble is, 63 million more people live in the United States than did 23 years ago. So it’s not that there aren’t any new listings, but there aren’t nearly enough.

Existing-home sales were higher for the latest reporting period, although supply shortages and hurricane-related activity caused sales to decline on an annual basis, according to the National Association of REALTORS®.

Affordability is also an issue for middle-income home buyers, according to NAR, yet the existing-home sales rate is still trending higher despite these challenges.
For agents, a key consideration for many clients and another underlying strength in the real estate market, supply constraints notwithstanding, is interest rates.

According to Freddie Mac, the average rate for 30-year fixed rate mortgages was 3.94 as of early November. This is only slightly above the Nov. 29, 2012 low of 3.32 – the lowest rate in their records which date back to 1971.

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