RE/MAX Co-CEO Adam Contos has offered his perspective on what’s ahead for the 2018 U.S. real estate market including a continued shortage of the number of homes for sale which, in part, led to more home sales and increasing home prices last year.
“Turn up the volume on new home building,” urged Contos, citing housing starts that are down 2.9 percent year-over-year and well below the historic 50-year average. “We’d love nothing more than to see the next generation of homebuyers start building equity now.”
Despite the shortage and any further tightening of inventories, Contos sees an abundance of positive trends too as the overall economy continues to strengthen fueled by wage growth and increasing consumer confidence.
A few things to watch out for according to Contos are any reoccurrences of the devastating hurricanes and fires of 2017, any negative impacts to the U.S. stock market and side effects of the tax bill that passed at the end of last year.
“We’ll certainly see our share of challenges in 2018,” said Contos. “But with the challenges will come ecstatic home buyers and sellers, new and booming communities (one boasting the new Amazon headquarters) and fresh innovations in real estate that we never saw coming.”
Inventory is Key. (Tired of hearing about inventory yet?)
- Turn up the volume on new home building. Until that happens, we’ll struggle with low inventory and some markets will feature all-out bidding wars. In 2017, housing starts were down 2.9 percent year-over-year and well below the historic 50-year average. That hurts. Even though there’s a shortage of labor and a spike in material costs, the primary reason for the low starts is that builders have focused on more profitable, higher priced homes and multi-family residential construction. We can’t blame them, but we need more entry-level houses. We’d love nothing more than to see the next generation of home buyers start building equity now. We saw glimmers of hope at the end of the year as U.S. single-family homebuilding and permits began to surge. We’d like to see that trend continue.
Existing Home Sales on the Rise
- Fueled by renewed consumer confidence, wage growth and an improving economy, existing home sales could increase and may even surpass record levels set back in 2006. What would slow us down? Any negative impacts on the stock market, even tighter inventories (there’s that word again), a repeat of 2017’s devastating hurricanes and fires or even the recently signed tax reform bill. Without getting too deep into the provisions of the tax bill that passed at year end, new restrictions on mortgage interest deduction and property tax deduction could deter some from buying homes in the country’s priciest markets. This could also deter some homeowners with existing large mortgages from selling. The changes to the standard deductions for both individual and married filers may also remove some of the incentive to buying a home nationwide. But we’ll wait and see what the real effects are of these provisions as buyers weigh their options with financial planners.
Changing Migration Patterns
- Home buyers discouraged by affordability and low inventory (sorry, I had to do it) in certain cities, markets and states, will look to other, more attractive and more inviting neighborhoods. We expect to see more home sales in the suburbs, less-populated markets and even more affordable states. Cities that have the most effective transportation systems and those that promote high-ammenity, “walkable,” contemporary neighborhoods will benefit the most. We may even see some migration from large, expensive coastal cities toward the Midwest and South where home prices are lower.
Always the Unexpected
- Gadgets, apps, online tools, skilled agents with killer technology. Anything that makes buying and selling a home more plausible and less stressful will continue to launch and evolve, especially in 2018. Consumers may not use bitcoins to buy a home tomorrow, but we’re open to the possibility. RE/MAX agents understand the complexities of a home transaction. That’s why we’re here. But, we’re all for streamlining that process by signing documents online, video chats with our clients and perusing open houses via virtual reality goggles. If it helps us get our buyers and sellers in a home, then count us in.
RE/MAX, LLC, based in Denver, CO, also issues housing data monthly via the RE/MAX National Housing Report which compiles data from 54 U.S. metro markets to shows trends.