Factors Affecting Home Buying in 2018
Are you looking to purchase a home in 2018? While a lot depends on where you live, new forecasts for 2018 show that this just might be your year to buy.
Prices are climbing, but not too fast
Over the past few years, home prices have gotten increasingly more expensive. In 2017, there was a 5.5% year-over-year increase. However, in 2018, there is only a 3.2% year-over-year increase. Existing home prices are predicted to rise 2.5% year-over-year. This is also dependent on where you live. Previous popular markets, such as San Francisco, are expected to lose steam while home prices in Southern states are expected to rise. Basically, while home prices will still increase, they will not do so at the rate they have been in the past couple of years.
Rates are climbing
For years, there have been record low-interest rates. However, this is expected to change in 2018. At the end of 2017, the rate for a 30-year fixed mortgage broke the 4% mark after hitting 3% in recent years. By the end of 2018, rates are expected to hit 5%. The longer buyers wait, the more expensive it will be to buy a home.
Inventory levels may begin to increase
Since 2015, there has been a housing inventory shortage in the United States. The low inventory level in 2017 drove bidding wars and fast home appreciation. In 2018, however, there may be some increasing inventory. New home construction is expected to expand throughout the new year. However, this will happen slowly as there is a constricted labor market, limitations on the number of lots and land available, tight financing, and expensive costs for building materials.
More renting versus buying
The new tax law makes it more expensive to own a home in high tax, high priced areas. These changes in addition to home prices rising faster than wages and salaries may lead some potential home buyers to rent instead. Additionally, high rents and student debt loans have made it more difficult for younger buyers to save up for a down payment.