CHICAGO – (Realty News Report) – Median home prices are predicted to rise 5 percent next year, mortgage rates are forecast to gradually increase to 4.5 percent from 4 percent today, and new home sales are expected to jump 13.9 percent to 690,000 during the same period, according to the National Association of Realtors annual forecast.
Speaking at the annual Realtors Conference & Expo in Chicago Friday, NAR Chief Economist Lawrence Yun cautioned that the figures were calculated before the House Ways and Means Committee issued its legislative proposal to overhaul the U. S. Tax Code Thursday – which reduces the mortgage interest deduction by half. Currently, a married couple can deduct interest on mortgages of up to $1 million; the GOP plan would cut that by 50 percent. In addition, the Republican draft tax reform plan would cap deductions of state and local property taxes at $10,000.
Thanks to the steadily improving U.S economy, sustained job growth, and rising confidence that now is a good time to buy a home should pave the way for an increase in existing-home sales in 2018.
However, clouds on the horizon in some areas of the nation as well as possible passage of a tax reform bill that Realtors say disincentive home ownership and threatens to handcuff what should be stronger activity.
In 2018, existing home sales are forecast to expand 3.7 percent to 5.67 million. Yun estimates that existing-home sales will finish at a pace of 5.47 million – the best since 2006 but only a 0.4 percent improvement over last year
Already, Yun said, analysts are reporting a softness in the national residential real estate market. Prices are still holding, he added, and there is a critical shortage of inventory in some markets.
“Currently there is about a four month supply of homes available; in a normally balanced market, there should be a six months supply,” Yun said. “In places like Dallas and Austin, we’re seeing an inventory shortage. In Austin, there is less than a two months supply.”
NAR’s research found that residents are staying in their current homes longer – 10 years. “It used to be six years,” he added. “One of the concerns of people who want to move is if they sell their current home, will they find another home to move to?”
One major roadblock to home ownership: affordability. Home prices in some areas of the country are also out of reach for many people. Since 2011, he added, income grew by 15 percent but home prices surged 48 percent. “It’s demoralizing for renters,” he added. “Affordability is getting out of hand.”
Yun added that more residential product is needed. “We need to get home builders to build more homes.”
Mortgage rates are expected to rise next year, Yun predicted, noting that on Thursday, President Donald Trump nominated Jerome H. Powell — a centrist Republican — as the next chair of the Federal Reserve. Powell has been a member of the Board of Governors of the Federal Reserve since 2012 and has supported the Fed’s policy of gradually raising interest rates.
“We’ll have to see what Powell’s view will be,” said Yun. “As it stands, he’ll probably follow what (current chair) Janet Yellen would do but a little more aggressively.”
After two consecutive quarters of economic growth of 3 percent, Yun expects GDP to come in around 2.2 percent for the year and to expand to 2.7 percent overall in 2018, as long as job growth remains solid and residential construction picks up.
Nov. 3, 2017 Realty News Report Copyright 2017