Real Estate Market Expected to Remain Tight in 2018

Real estate markets across the U.S. are expected to remain tight in 2018, as demand for homes continues to exceed the available supply. This is according to a survey of more than 100 economists, academics, and housing market experts.

Housing Market Still Tight, Heading Into 2018

In its most recent “Home Price Expectations Survey,” Zillow asked the 100+ panelists about the most surprising real estate trends of 2017. Most pointed to the chronically low level of inventory as the most surprising trend of last year. More importantly, the panelists surveyed said they expect those conditions to carry over into 2018.

A lack of supply has been the big real estate headline for the past couple of years. In many cities across the country, homes for sale are in short supply. This forces buyers to compete for limited inventory.

In a separate report, published just last week, the company’s analysts actually quantified the drop in housing inventory that has occurred nationwide.

Key findings from the January 18 Zillow report:

  • There are 10 percent fewer homes on the market to choose from than a year ago, and up to 40 percent fewer in housing markets where home values are appreciating fastest.
  • For-sale inventory across the country is down 10 percent since last December and has been falling on an annual basis for the past three years.
  • The inventory shortage is most pronounced in some of the housing markets where home values are appreciating the fastest.

Low Inventory Is Boosting Home Prices

This is partly why home prices across the country have risen steadily (and in some markets significantly) over the last couple of years. There is plenty of demand for homes in most parts of the country right now, but not enough supply to meet it. This inventory imbalance has put consistent upward pressure on house values for the last couple of years.

By one estimate, U.S. home prices rose by 6.5% over the past year alone. That’s a higher level of appreciation than the historical average going back several decades. The hottest real estate markets, where supply is lowest, experienced double-digit price growth during 2017 alone.

Home values appear to be cooling a bit, as we move into 2018. Or perhaps “normalizing” is the right word. But the inventory situation is still very much imbalanced in most cities across the nation.

Consider the numbers. A healthy and “balanced” real estate market is said to have somewhere between a 5-month and 6-month supply of homes for sale. As of December, the U.S. had a meager 2.6-month supply of homes for sale. And some of the hottest markets were in the 1-month range, or even below that mark.

Buyers Should Bring Their ‘A’ Game

In a tight real estate market with limited inventory, home buyers need to bring their ‘A’ game. Working with a real estate agent is a good start. An experienced, market-savvy agent can help you locate a suitable property and evaluate the asking price. More to the point, an agent can help you make a strong offer in a timely fashion — and that’s the key to success in a competitive market with limited supply.

It’s also wise for buyers to have their financing lined up ahead of time, before shopping for a home. Sellers will expect this. Buyers planning to pay cash should be prepared to show banks statements. And those using a mortgage loan can benefit from being pre-approved by a mortgage lender.

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