Inventory issues to shape 2018 housing market

by Francis Monfort13 Dec 2017
Low inventory, continued demand, and tax reform will all shape the housing market in 2018, according to predictions released by Redfin.

“Inventory is expected to be the major factor shaping the 2018 housing market, but that’s nothing new,” Redfin Chief Economist Nela Richardson said. “For the third year in a row, the nationwide inventory shortage is likely to continue to hinder sales and increase prices. We expect small increases in inventory at the high end of the market by year-end. Starter-home inventory has not increased meaningfully since 2011, and we don’t expect it to increase at all next year. Exacerbating the problem is high rents and vacation home rental platforms that make it both easy and lucrative to own more than one home.”

Redfin also expects tax reform to result in home buyers leaving states with high taxes and homeowners staying in their homes longer. California, New York, New Jersey, Maryland, Massachusetts, and Illinois could eliminate deductions for state and local taxes, and Redfin said people may leave these states as a result.

Another tax reform proposal would raise the number of residency years required to be eligible for a capital gains tax deduction. As a result, Redfin expects homeowners to stay in their home longer to avail of the incentive.

Richardson expects homes to sell faster in the 2018 housing market. While 25% of homes sold in two weeks or less during the peak of the 2017 buying season, it is expected that 2018 will see up to 30% of homes sold within the same period.

Other predictions include the rise of the “urban suburb” driven by high-income millennials, an increase in mortgage payments to the highest rate in a decade, and an acceleration in the trend of people living with roommates. Redfin also said that its analysts do not expect a bubble in 2018.

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