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Predictions for the 2018 United States Housing Market

housing trends

If you pay attention to the real estate market, you already know that 2017 was quite a year. Many parts of the country saw record gains in home values, making it difficult for many potential buyers to crack into the market. Of course, it was a great time to be a seller, as long as you could afford to buy a new property once yours was sold. But what does the market look like moving forward? According to many experts, it is wise to expect more of the same.

A Stalemate

One of the factors driving home prices higher and higher is the lack of inventory on the market at any given time. There have been relatively few homes available in recent years in many markets, which has led to bidding wars and higher sale prices. Those who are able to sell typically make a nice profit on the sale of their home, only to turn around and use that profit (and then some) on a down payment for a new property.

It is likely that prices will remain high until something happens to break up this stalemate. Prices have remained high due to low inventory, but the high prices are also responsible for keeping inventory low (since people can’t afford to move). In this way, the market is ‘stuck’, and it is anyone’s guess as to when it will break loose. Most likely, this will be a slow and gradual process, where inventory gradually rises and home prices gradually move back down.

Lack of New Inventory

Another issue keeping housing prices high is the lack of new inventory which has been making its way to market in recent years. Builders have been constructing more multi-unit structures than single family homes, making a brand new single family home relatively difficult to come by. As no one obviously has to move out of a single family home when a new family moves in, new construction is an important part of a healthy real estate market. With population growth, it is key for new homes to become available at a sufficient rate – and that has not been the case lately. If prices remain high, however, builders will see more and more financial motivation to find land for single family homes.

Tax Matters

The new tax laws that have been put into place for 2018 will impact how much mortgage interest can be deducted at the end of the year. While this is a change that could have a sizable impact on the tax bills of some wealthy residents, it is not likely to have a powerful impact on the average real estate market. Mostly, it will have an effect on luxury markets, where home prices are regularly beyond $1 million.
In the end, no one knows for certain where the real estate market will be headed in 2018. However, if we look to signs from the way 2017 ended, it seems a safe bet that prices will continue to rise slightly as the months go by.

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