The FINANCIAL -- Trulia, a home and neighborhood resource for homebuyers and renters, on December 7 released its 2018 Housing Outlook Report. Heading into the new year, Trulia Chief Economist Ralph McLaughlin shares his predictions for the housing market in 2018:
Tax Plans May Help Cool Expensive Coastal Markets: As Washington nears a tax overhaul that shifts burdens for homeowners, the luxury market and housing markets in expensive, high-tax states in the Pacific West and Northeast might see cooling. This could include slowing home price growth, new construction and existing home sales.
Homeownership Rate Will Continue to Climb: 2017 saw the first significant increase in the homeownership rate in over 10 years. Meanwhile, the number of owner-occupied households grew faster than renter households for three consecutive quarters—a first in 12 years as the number of renter households fell for two consecutive quarters. As Gen Xers transition back from renting to owning and more millennials become homeowners, the homeownership rate will continue to increase as it has trended in 2017, albeit slowly.
Trulia's Top 10 Housing Markets Poised for Growth
Trulia identified 10 housing markets to watch in 2018 among the 100 biggest markets, based on five key metrics: strong job growth over the past year, low vacancy rates, high starter-home affordability, more inbound than outbound home searches on Trulia and a large share of people under age 35 in the population as a measure of prospective first-time homebuyers.
Grand Rapids, Mich.
El Paso, Texas
San Antonio, Texas
Fort Worth, Texas
Key Findings from Trulia's American Dream Survey
The report also includes findings from Trulia's annual survey of American sentiment on homeownership in the year ahead, which was conducted online by Harris Poll of more than 2,000 Americans age 18 and older.
Rising Home Prices Becoming Bigger Obstacle, Many Plan to Buy After 2020
One in four Americans (25%) believe buying a home in 2018 will be better than in 2017—the same as those who say it will be worse (also 25% of Americans). One possible reason for the split sentiment: 40% of American renters who desire to buy a home say rising home prices is their biggest obstacle to homeownership—the highest level reported since 2013 when only 22% said the same. Perhaps as a result, only 10% of Americans plan to buy a home as their primary residence in the next 12 months while 41% plan to wait at least two years.
Rising Optimism for Home Selling Unlikely to Ease Tight Inventory Immediately
Nearly one in three Americans (31%) think 2018 will be a better year for selling a home than 2017, versus 14% who think it will be worse—a 17-percentage point differential, which is the highest differential since 2014 (20%). This spells good news for the current inventory crunch, but relief may not come for a few years as only 6% of homeowners plan to sell their home in 2018.
73% of Millennials Aspire to be Homeowners, But Saving Money Remains Key Obstacle
Today, 73% of Americans aged 18-34 say homeownership is part of their personal American Dream; however, this majority is below 2015's level of 80% expressing this same sentiment. Yet for many millennials, their homebuying plans aren't happening soon: 65% who plan to buy a home one day said they don't plan to do so until at least 2020. Why are they waiting? Perhaps lack of funds—saving for a down payment is one of the greatest obstacles to homeownership (66%), along with rising home prices (47%) and qualifying for a mortgage (37%) for millennial renters who want to buy a home.
Natural Disasters Causing Homeowners, Homebuyers to Rethink Where They Live
After 2017's array of floods, hurricanes, wildfires, and other natural disasters, 39% of Americans say they are more concerned about the potential threat of natural disasters affecting their homes, with a higher proportion of those in the hurricane- and flood-ravaged South expressing concerns (43%). Only 5% of Americans are less concerned about this potential threat. More tellingly, a majority of Americans said the potential for the aforementioned natural disasters – floods (72%), hurricanes (61%) and wildfires (58%) – would influence their home searches if they were looking to purchase a home.
Quotes from Trulia's Chief Economist Ralph McLaughlin:
"Homeownership will continue its comeback story in 2018 as Gen Xers who were hard-hit during the Great Recession become homeowners again, and as more millennials buy homes for the first time. But homebuyers won't be without challenges as they'll still face low inventory, slow wage growth and expensive starter homes. For millennials, they have the added hurdle of saving enough money to make a down payment and make competitive offers amid rising home prices."
"Amid 2017's slew of natural disasters, future homebuyers may rethink where they live. But the desire to become a homeowner remains strong enough so these concerns are only likely to deter demand in the most vulnerable of locales."