Look­ing for­ward to 2018 mar­ket


This past Novem­ber we at­tended the Na­tional As­so­ci­a­tion of Re­al­tors con­fer­ence in Chicago. This awe­some an­nual event has over 100,000 Re­al­tors from all over the coun­try in at­ten­dance. Not only is it a great place for net­work­ing and learn­ing the new­est tech­nol­ogy, it is also the time to get a true pulse on the state of the U.S. hous­ing econ­omy and what the fu­ture por­tends. Lawrence Yun has been NAR’s chief econ­o­mist for over 15 years and is a reg­u­lar guest on news pro­grams on CNBC and Bloomberg. When Mr. Yun gives his eco­nomic fore­cast for the hous­ing mar­ket, you can bet that, bar­ring any cat­a­strophic events, his pre­dic­tions will be on tar­get. So, where do we stand and what does the na­tion have to look for­ward to in 2018?

Me­dian home prices are at an all­time high, hit­ting over $260,000 in May and down sea­son­ally in Septem­ber to $240,000. Pend­ing sales, how­ever, were down quite a bit in Septem­ber. This de­cline in pend­ing homes sales is due in part to the hike in over­all home prices. From 2011 to 2017, the av­er­age home price has in­crease by 48 per­cent; how­ever, the av­er­age house­hold in­come has only in­creased by 15 per­cent. Clearly, it is easy to un­der­stand why so many po­ten­tial home own­ers are not able to af­ford to buy in to­day’s mar­ket and why our coun­try’s home­own­er­ship rate still hov­ers at a 50year low. Only 64 per­cent of U.S. cit­i­zens own their own home and more than 16 per­cent of young adults still re­side with their par­ents. In fact, nearly half of mil­len­ni­als polled be­lieve that the “Amer­i­can dream” is dead.

The de­cline in home sales is also due to the lack of in­ven­tory. It has been cal­cu­lated that this coun­try re­quires over 1.2 mil­lion newhomes to be built each year to keep up with the grow­ing pop­u­la­tion. Since the re­ces­sion in 2008, new-home starts have been well below that num­ber and only reach­ing 900,000 units this past sum­mer. The re­ces­sion took such a hit on res­i­den­tial con­struc­tion work­ers that more than half lost their jobs and went into other fields. The re­ces­sion over­all caused the loss of eight mil­lion jobs across the coun­try, but in the past seven years 16 mil­lion jobs have been gained. How­ever, there are fewer res­i­den­tial con­struc­tion work­ers em­ployed to­day than in 2001 and many of those work­ers are re­build­ing hur­ri­cane-rav­aged com­mu­ni­ties in Florida and Texas and are not oth­er­wise con­tribut­ing to new con­struc­tion. That means the hous­ing short­age will con­tin- ue for many years as de­mand out­weighs ac­tual in­ven­tory.

There has been talk that we are­mov­ing to­ward an­other pos­si­ble bub­ble in real es­tate with so many com­mu­ni­ties ex­pe­ri­enc­ing dou­ble-digit ap­pre­ci­a­tion in a sin­gle year. Mr. Yun does not think that is the case. In 2008, homes sales reached a high of 8.5 mil­lion ver­sus 5.5 mil­lion for this past year. Ad­di­tion­ally, in 2008 we reached a high of 1.6 new-home starts and that num­ber is 53 per­cent lower to­day. Mr. Yun pre­dicts that the eco­nomic fore­cast will re­main strong, which will con­tinue to strengthen the res­i­den­tial hous­ing mar­ket. He pre­dicts that ne­whome sales will in­crease to al­most 700,000 and ex­ist­ing home sales will inch closer to the 6,000,000 mark. While the me­dian-price ap­pre­ci­a­tion this past year was 6 per­cent, he be­lieves next year will be closer to 5 per­cent as the 30-year in­ter­est rate hov­ers closer to 4.5 per­cent, fur­ther im­pact­ing af­ford­abil­ity.

Our take-away from the con­fer­ence is that the over­all eco­nomic out­look is good for hous­ing; how­ever, the de­cline in home­own­er­ship and a malaise by mil­len­ni­als about at­tain­ing the Amer­i­can dream are alarm­ing. It was Franklin D. Roo­sevelt who wisely ob­served that, “A na­tion of home­own­ers is un­de­feat­able.” When more peo­ple own their own home, the qual­ity of our na­tion im­proves be­cause ev­ery­one has a stake in our suc­cess. When res­i­den­tial real es­tate is chiefly owned by large cor­po­ra­tions, Main Street U.S.A can be­come Pot­tersville be­fore you know it.

Carson & Carson are trusted real-es­tate pro­fes­sion­als and a suc­cess­ful hus­ban­dand-wife duo. Melissa is the 2017 pres­i­dent of the Santa Fe As­so­ci­a­tion of Re­al­tors. Rais­ing a fam­ily in NewMex­ico, they pro­vide key in­sights and longterm per­spec­tives for home buy­ing and sell­ing in Santa Fe. Call them at 505-699-3112 or email at twicethe­selling­power@gmail.com

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