It won’t be getting any easier to buy a new home in 2018, according to Zillow’s 2018 predictions.
In fact, the real estate site predicts homeowners will likely be renovating their homes rather than buying new ones next year as the nationwide “inventory shortage” continues.
“In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat,” Zillow’s Chief Economist Dr. Svenja Gudell said in a statement. “Homeowners who are looking for a change will turn to remodeling and redecorating instead of selling their home and facing the challenges of being a buyer in a sellers’ market.”
Zillow’s newest prediction indicates the potential return of the “suburban sprawl.”
“The suburbs will expand as the cost of land and construction reaches a tipping point in urban areas,” according to the report. “Urban living is popular among those looking for close access to job centers and cultural amenities, but building costs and regulations will lead to increased development in the suburbs.”
The company predicts home prices will grow 4.1 percent next year, citing more than 100 housing experts and economists surveyed. Currently, home values are growing at 6.9 percent annually, the report states.
“We’re on the other side of the housing recovery, and the real estate market looks quite different than it did five years or even 15 years ago. We have a huge generation entering the market, who really want to be homeowners, and they’re faced with an inventory crisis that leaves them with few options. Builders won’t ignore this hungry market, and we’ll start to see a rise in new construction at the more affordable end, instead of all the luxury buildings we’ve seen lately. However, builders are also facing high costs, so instead of adding density in cities where zoning laws and land costs often preclude affordable building, we’ll see the suburbs grow and expand outward.”
The National Association of Realtors also reported a national supply shortage in recent months.
“Home sales in recent months remain at their lowest level of the year and are unable to break through, despite considerable buyer interest in most parts of the country,” Lawrence Yun, the chief economist for the National Association of Realtors, said in a statement. “Realtors this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings – especially at the lower end of the market – and fast-rising prices that are straining the budgets of prospective buyers.”
He noted, however, that hurricanes in Texas and South Florida impacted sales activity.
Yun told Crain’s Chicago Business in September he expects the Chicago-area housing market to gain strength in 2018. He noted, however, the state of Illinois’ finances could dampen the market, citing uncertainty over the tax burden and state’s budget.