In its latest poll of some 45 top property market analysts, Reuters sets the stage by reporting that the housing market’s acute shortage of affordable homes will continue into 2019.
Average annual earnings growth continues to remain below 3% as these 45 market analysts predict the S&P Case Shiller composite index of home prices in 20 major cities to further rise +5.7% this year. The circle is self perpetuating…supply remains behind demand, wages are stagnating, home prices are increasing and even fewer homes are affordable.
Likewise, this Reuters poll indicates that home prices are expected to further rise +5.7% this year, +4.3% in 2019 and +3.6% in 2020. Earnings growth predictions are 2.8% and inflation predictions currently stand at 2.5%
Sal Guatieri, a senior economist with BMO Financial Group, said. “We are not seeing a temporary phenomenon. House prices have been outrunning family incomes for several years in the US and while demand has cooled off a bit, the supply side is still very tight. I think house prices will continue to outrun family incomes for at least another year…it will take some time for demand to slow and, to some extent, for supply to increase.”
Looking at April 2018 data, Reuters found that inventory of existing homes for sale had declined for the 35 consecutive month on an annual basis and that median home prices have continued to increase for the 74th consecutive month. (Data on inventory and prices all homes in Manhattan through Q2 2018 contradicted this data, however. Check out this week’s piece on Manhattan’s Homebuyers.)
80% of the 45 analysts participating in the latest Reuters’ poll say that already tight supplies of affordable homes will continue to stay the same or become even tighter. These analysts also predict that existing homes for sale (90% of the market) will increase slightly to some 5.6M units from 5.46M units in the remaining quarters of 2018.
The Reuters’ poll indicates that the 30-year mortgage interest rate will rise to 4.6% by the end of 2018 and that it will tip up to 5.0% by the end of 2019. One of the participating analysts, Jonas Golermann, development market economist with IMG, said, “With mortgage rates continuing to rise, affordability is getting steadily worse.”