WASHINGTON – Dec. 15, 2017
– The housing picture is likely to improve in 2018. Why? Home prices are
expected to climb, but not as fast.
Plus, more houses could be
for sale toward the end of the year, giving homebuyers a greater selection to
choose from, while homeowners will have more equity to borrow from.
Yet in other ways, 2018
might continue to be challenging, especially for homebuyers. Mortgage rates are
likely to rise, reducing affordability.
Here are 10 housing and
mortgage trends to expect in 2018.
1. Home prices decelerate
Good news for first-time
homebuyers: Home-price appreciation is expected to cool down in 2018 after a
torrid couple of years.
Home prices rose 6.3% in
2016, according to the Federal Housing Finance Agency. They're on track to
exceed 6% in 2017, too. But for next year, the median forecast among six
industry and lender groups is for a 4.1% increase in existing home prices
nationwide.
Why the slowdown? One
factor is home construction. Economists expect the construction of
single-family houses to rise sharply in 2018, based on building permit
applications. The median estimate has single-family housing starts rising about
8% in 2018, to roughly 912,500 new houses.
2. More homes for sale
Homebuyers are struggling
to find houses for sale. The shortages are especially acute for the kinds of
homes that first-time buyers tend to get. Among the reasons for the tight
supply:
·Many baby boomers are content to age in their
homes instead of downsizing
·Investors bought millions of homes after the
housing bubble burst, and they're making too much money as landlords to sell
·Home builders make more profit from expensive
houses than entry-level houses, so that's what they're constructing
But there's some hope for
2018: Realtor.com predicts that the housing supply pinch will begin to ease
late in the year.
"It looks like we
could get to a point where we're seeing growth in inventory sometime in the fall
of 2018," says Danielle Hale, chief economist for Realtor.com.
3. Home sales could rise
Resales of existing homes
are expected to rise modestly in 2018. The median estimate is that existing
home sales will rise 2.5%, to 5.6 million units.
Meanwhile, sales of new
homes are expected to rise a median of 7%, to 653,500 newly built single-family
houses.
According to Realtor.com,
cities in the South will show the most sales growth in 2018. Hale says she
expects 6% existing home sales growth, particularly in markets such as Dallas;
Tulsa, Oklahoma; Little Rock, Arkansas; and Charlotte, North Carolina. Hale
says those places are not as "regulation constrained," they have
strong regional economies and developers have plenty of vacant land to build on.
4. Mortgage rates head up
Mortgage rates are
expected to rise in 2018. CoreLogic, a data provider for the real estate
industry, averaged six forecasts of mortgage rates, arriving at a consensus
view that the 30-year fixed will average 4.7% in December 2018. In November
2017, the 30-year, fixed-rate mortgage averaged 4.07%.
"Not only are
mortgage rates higher, but mortgage rates will be at the highest level since
2011," Nothaft said at the Urban Institute symposium. "So we're
looking at an environment, going forward, where this era of cheap mortgage
rates will largely be behind us."
Interest rates are
notoriously resistant to prediction, though. At the beginning of 2017, most
people expected mortgage rates to rise steadily throughout the year. And they
did rise - for a few weeks. The average 30-year fixed peaked in mid-March 2017
at 4.58%, according to NerdWallet's daily survey. Then it declined, dipping
slightly below 4% a few times in the summer, before moving upward slightly in
the fall.
5. Affordability declines
If, as expected, home
prices and mortgage rates go up in 2018, homes will be less affordable.
For example, if mortgage
rates rise to 4.7% toward the end of 2018, and the median price of existing
homes rises by 4.1%, then monthly mortgage payments for a typical house would
rise substantially.
But according to an Urban
Institute analysis, middle-class families in much of the country still have
some financial wiggle room if rates and prices rise in 2018. Most home buyers
don't appear to stretch to the limits of affordability, the Urban Institute
wrote.
6. More equity, more HELOCs
As home values rise,
homeowners gain equity. And banks expect millions of homeowners to borrow
against that equity.
About 1.6 million
homeowners are predicted to get new home equity lines of credit in 2018, a 16%
increase over 2017, according to a recent TransUnion study. The credit bureau
says 67% of homeowners have enough equity to get HELOCs, and 80% of those
borrowers have high credit scores.
TransUnion forecasts that
10 million homeowners will get HELOCs from 2018 through 2022, double the number
of new lines of credit in the five years before that.
7. Security headaches continue
Thieves are stealing down
payments from homebuyers by combining email hacking with wire fraud. And there's
no sign of it slowing.
Complaints of this type of
wire fraud skyrocketed by 480% in 2016, according to the 2016 annual report
(the latest available) from the FBI's Internet Crime Complaint Center. Lenders
and title companies say the problem worsened in 2017, and that they fend off
this form of fraud constantly.
The best way to avoid
becoming a victim: When you receive emailed instructions for wiring money, call
your agent to verify. The email may be a fake, designed to trick you into
wiring money into a thief's account.
8. More options for people with
credit issues
A few specialty lenders
are focusing on nontraditional mortgages. For example, Angel Oak Mortgage
Solutions in Atlanta targets the borrower 'who has had a life event, so they
lost their house or had to file bankruptcy or things got really bad, but
they've now got their feet back on the ground and they're ready to buy their
next house,' says Tom Hutchens, the lender's senior vice president of sales and
marketing.
Several lenders offer
interest-only mortgages, and even loans with limited income documentation.
These mortgages are dubbed 'non-QM' because they don't meet Fannie Mae's and
Freddie Mac's plain-vanilla 'qualified mortgage' rules. One prominent non-QM
lender, Impac Mortgage Holdings, plans to begin securitizing these loans early
in 2018.
9. Lenders embracing automation
Mortgage lenders continue
to pour money into automating the loan-application process. The best-known
example is Rocket Mortgage by Quicken Loans. But Quicken isn't the only lender
that embraces automation. Some lenders, such as loanDepot, cook up their own
automation in-house, while software providers such as Blend and Roostify help
large and small banks to automate applications. Now a few lenders want to use
automation to guide borrowers to loan products that best suit them.
10. Tax reform could affect
buyers and owners
Lawmakers were still
working on tax reform as this article was being written. Preliminary House and
Senate versions limited the number of home sellers who would benefit from the
home capital gains exclusion, and they treated the mortgage interest tax deduction
differently. It's too early to know how a final tax reform bill would affect
home buyers and homeowners, but we will keep you posted.
Copyright © 2017 Newton
Press Mentor; Holden Lewis, a writer for NerdWallet. The article 10 Housing and
Mortgage Trends to Watch for in 2018 originally appeared on NerdWallet. All
rights reserved.
source:
http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=1&id=360195
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