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What to Expect from the Housing Market in 2018

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In 2017, the housing market was plagued by soaring prices and limited inventory. Are things expected to change in 2018? Here are some of the top industry predictions for this year’s housing market.

Increasing inventory: According to projections from Realtor.com®, the 2018 housing market should see positive year-over-year inventory growth for the first time in three years. Experts believe inventory declines will begin slowing during the first half of the year before ascending in the fall after peak buying months. That said, most of the growth is expected to be for homes priced over $350,000, while starter home inventories are expected to remain depleted. Increased inventories are also likely to be regional, depending a lot on local market conditions. For instance, while Nashville, Kansas City and Philadelphia are expected to see inventories recover fastest, inventories in many other cities will likely lag until the end of the year.

More millennials: Fulfilling a long-held belief, millennials are expected to gain a substantial market share in 2018. Experts project that millennials could make up as much as 43 percent of all home buyers, which would make them a key driving force in next year’s housing market. Right now, millennials make up the majority of lower price home mortgages. In 2018, they are expected to encroach or even overtake older buyers on mid- and upper-tier mortgages.

Slowing appreciation: While home prices are expected to continue their ascent in the new year, the rate of appreciation should slow from the 5.5 percent increase in 2017 to a 3.2 percent growth rate nationwide, according to Realtor.com®. Again, most of this will occur among higher-priced homes, while entry-level homes are likely to see a greater rate of appreciation, thanks to limited inventory and increased competition from buyers.

Tax issues: While policymakers have promised that tax reform will help most Americans save money, it could actually slow the housing market. While the details of a proposed tax bill are still somewhat up in the air, experts agree any changes are likely to include provisions that will reduce home ownership tax benefits. That said, renters are likely to pay less in taxes, while some buyers could benefit from having more money to put toward down payments.

A southern surge: According to projections from Realtor.com®, the south is set to lead the nation in sales growth, with Dallas, Tulsa, Little Rock and Charlotte standing out. Sales in these markets are expected to top national averages, increasing by at least 6 percent. In comparison, national sales growth is expected to average about 2.5 percent. Experts say the south is primed for increased sales growth due to healthy building levels, which have served to combat the housing shortage. This localized inventory growth leaves the region in a good position for continuing growth, not just for 2018, but for several years to come.

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