January 22, 2018
No one owns a crystal ball, but people like predictions. Sure the tax plan and now the government shutdown is grabbing the headlines, but Orion’s brokers want to know what are folks saying about housing in 2018. Opinions on the future of the housing industry tend to vary from one expert to the next, but there do seem to be common themes out there. The last few years have been characterized by low rates, low inventory, and relatively tight credit.
Unfortunately for Orion’s broker’s clients, many believe that the historically tight supply of single-family homes will tighten further in 2018 after hitting a record low in November 2017: On December 21, 2017, the National Association of Realtors announced that November 2017 remaining inventory of existing homes for sale hit a record low of 3.4 months. This tight supply trend has been going on for more than five years – don’t look for much relief.
The national home price boom that began in mid-2012 should continue, and given the unprecedented low levels of inventory, will even accelerate further. The substantial reduction in the utilization of the mortgage interest deduction, and commensurate reduction in subsidies, will somewhat reduce upward pressure on home prices. Without the tax act, the prediction for 2018 home price increase would have been even higher: 6.75% to 7.25%.
First-time buyers will face even higher home price gains for entry level homes. Expect year-over-year gains for the bottom third of homes to come in at 10.5% to 11% for 2018. At current levels of wage growth, this boom in entry level home prices is ultimately unsustainable.
First-time buyers will continue take on even more leverage to keep up with the out-sized home price gains on entry level homes. Put another way, down payment assistance programs will continue to be popular, especially if 30-year mortgage rates creep higher. Be sure to ask your Orion AE about them.
Regardless of the future environment, you can be assured that your Orion Account Executive will help you obtain the best program suited for your borrower, with the lowest rate.