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 firstname.lastname@example.org