The continued rise in house prices will be weakened by concerns over affordability and the low supply of available homes.
Speaking at a residential real estate forum at the 2018 Realtors Legislative Meetings & Trade Expo, Lawrence Yun, chief economist at the National Association of Realtors presented his midyear forecast.
He expects home sales to hit 5.6 million for 2018, up 1.8% following a 3.8% rise in 2016 to 5.5 million and a 1.1% rise in 2017 to 5.5 million. For 2019, Yun forecasts 5.7 million sales.
"Overall fundamentals remain solid, driven by a growing economy and steady job creation, which will sustain home sales in 2018 slightly above last year's pace," said Yun.
Yun says that mortgage rates are set top be 4.6% by the end of 2018 and 5% in 2019, while home prices will increase 4%. These increases mean affordability will be at a 6-year low.
"Challenging affordability conditions have prevented a meaningful rise in the homeownership rate after having fallen to a 50-year low a few years ago," said Yun. "To increase homeownership, more home construction is needed, which could be boosted by delivering regulatory relief to community banks, removing the lumber tariff, re-examining stringent zoning laws and training more workers for the construction industry."
Student loan debt adding to pressure
The rise of student loan debt is also constraining Americans’ ability to afford homes.
That was noted by Realtor.com’s director of demographics and behavioral insights Jessica Lautz, who also presented at the forum.
She said that student loans were the reason for millennials delaying homeownership by a median of 7 years. Young buyers who had bought a home typically spent 17% less than those with no student debt.
"The homeownership rate amongst some ethnic groups hasn't rebounded since the recession, and the ongoing affordability crisis has hampered potential buyers under 35, especially those with student debt, from accessing mortgage credit and making home purchases," said Lautz.