The National Association of Realtors is reporting this month that a 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, but continued supply shortages, and passage of a tax bill that disincentives homeownership, threaten to handcuff what should be stronger activity.
“Despite considerable demand all year, pending sales have lost a step in recent months because low supply is pushing prices higher and making homebuying less affordable in several parts of the country,” said NAR Economist Lawrence Yun.
With a few months of data remaining in 2017, Yun estimates that existing-home sales will finish at a pace of 5.47 million – the best since 2006 (6.47 million), but only a modest improvement (0.4 percent) from 2016 (5.45 million). In 2018, sales are forecast to expand 3.7 percent to 5.67 million. The national median existing-home price is expected to rise to around 5.5 percent this year and next year.
“Ownership rates are currently below their peak across the younger age groups and in cities that have seen sharp price increases, and it’s not a good thing,” said Rosen, “A higher rate of homeownership makes sense. It is so important to the financial health of the economy. Homeownership helps households accumulate wealth over time, reduces inequality, increases investments in communities and boosts economic growth.”
Pointing to Los Angeles and the Bay Area as examples of areas with significant affordability constraints, Yun said unhealthy levels of price appreciation are also occurring in many other markets with strong job growth, but without the commensurate rise in housing starts. As a result, the ability to buy a home has become extremely difficult for even those with well-paying jobs and is forcing households to flee expensive areas in the West and Mountain regions for more affordable parts of the country. This in turn could affect future job growth in these areas and ultimately soften housing demand.