Real Estate Forecast: Next 5 Years

In 2017 the US real estate market got hotter: inventory got harder to come by, prices increased, mortgage rates barely changed at all, and new home construction finally picked up a bit at the end of the year. If you’re thinking of buying or selling a home in 2018, 2019 or in the next five years, it can be difficult to tell just how the market will look, due to the many factors involved— such as the continued lack of supply, or the impact of the new tax law. Experts mostly agree, however, that the US Economy for the next five years and even forward to 2026 is looking surprisingly positive—a far cry from the fear around the recent stock market correction.

According to Trading Economics, the US real estate market will be healthy for some time, and buying a home is currently a wise investment. Factors contributing to this conclusion include increased government spending, slowly rising (but still low) interest rates, the recovery of corporate funds back to the US, and strong foreign investment.

Housing shortages to continue

January’s sales were a bit disappointing, and it’s largely due to the continued shortage of housing. Zillow chief economist Svenja Gudell says low inventory will continue to push home prices up, standing in the way of first-time homebuyers struggling to save a down payment. There are 12% fewer homes to choose from nationwide than there were a year ago, and 51% of for-sale properties are in the top one-third of home values—out of reach, especially for first-time buyers. This trend is likely to continue.

High demand to continue, as well as rising prices

Demand will grow as young buyers have more savings to invest in a home. Corelogic expects home prices will grow 4.3% by December, while Gudell estimates 4.1%— 1.1 percentage points higher than the “normal” annual appreciation closer of 3%, but slower than the current annual pace of 6.9%. Experts say prices will continue rising in 2018 and the years to follow, but the rate of increase will slow. “Underlying the rising prices for both new and existing homes are low-interest rates, low unemployment and continuing economic growth,” according to noted David Blitzer of S&P.

Where to?

Nevada, Texas, Washington, and Florida are the states with the best outlook, and perhaps the best places to buy homes or rental properties. The Bay Area, Portland, and Seattle areas saw the highest growth in prices last year while LA’s fell. Listings fell drastically in central California, Oregon, Washington, and New York. Finally, population growth in part due to western migration in San Francisco, Denver, Houston, Seattle, and Phoenix foretell particularly strong housing markets in those regions.

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