Zillow’s Svenja Gudell, chief economist, recently discussed his predictions for the 2018 housing market. Among them are continuing low inventories, evolving design trends and slower growth patterns concerning home prices.
Gudell began by saying that “…we have a huge generation (Millennials) entering the market, they really want to be homeowners…home builders won’t ignore this hungry market and we’ll start to see a rise in new construction that is more on the affordable end of the (total market).”
Here are Gudell’s foresights broken into six categories…
1. Inventory shortages will continue to be a driving force in the housing market. Nationally, there is now -12% fewer homes to choose from than there were last year. 51% of properties that are available to purchase are priced among the top 1/3 of the market and therefore out of reach for first time homebuyers. First time homebuyers will also be challenged in having to compete for homes against seasoned, know-their-way-around-the-block buyers who have recently sold their homes.
2. Builders, despite having labor shortages and higher material costs, will likely turn their attention to building more entry-level homes aimed at first-time and lower-middle income buyers who need affordable options. (The number of entry-level homes available to buy is now below the 50-year average of 1.2M.)
3. Gudell thinks that Millennials (ages 25-34) will go to the suburbs in search of more affordable prices.
4. Homeowners will continue to remodel rather sell their current homes with the intention of making their homes look and feel like new.
5. As they have been doing, Baby Boomers and Millennials will continue to drive design trends just as they continue to drive market trends. For example, wide hallways are a must for both wheelchairs and strollers. Interior frameworks construction will be built with extra support beams behind walls to accommodate “extras” like grab bars in bathrooms.
6. Gudell expects prices to climb by some 4.1%, 1.1% higher than the normal appreciation of 3%. This is a slower rate of appreciation that the current pace of 6.9%.