Expect Home Prices to Continue Soaring in 2018
Home prices increased seven percent annually in November, marking the third consecutive month at this rapid growth pace, according to a report by CoreLogic.
That fits with the ongoing trend as sales prices climbed much faster in the second half of 2017 than the first half. Low supply and high demand are contributing to the rise in prices and both factors are expected to continue, per CNBC.
"Rising home prices are good news for home sellers, but add to the challenges that home buyers face," said Frank Nothaft, chief economist at CoreLogic. Nothaft pointed out that this is especially bad news for first-time buyers since the limited supply is the worst at the lower end.
"Move-up buyers with considerable down payments and those with cash made up a bulk of the sales activity last month," says Lawrence Yun, chief economist of the National Association of Realtors, per Realtor.com. "The odds of closing on a home are much better at the upper end of the market, where inventory conditions continue to be markedly better.”
From October to November, previously lived in homes saw a 5.6 percent increase in sales and single-family home sales climbed 4.5 percent, according to NAR’s recent report.
Joseph Kirchner, a senior economist at Realtor.com, says “we’re in for a bumpy ride.” He predicts the high sales growth will not be sustainable in the coming year with the rise in sales and the fewest amount of homes for sale since the 1980s.
Big metropolitan regions are experiencing the largest sale price gains. In the nation's top 50 markets, 50 percent of the housing inventory is now overvalued based on employment and income data. CoreLogic characterizes an overvalued market as “one in which home prices are at least 10 percent higher than the long-term, sustainable level.”
The November report listed Las Vegas as the leader of the pack with an annual price gain of 11 percent. Seven of the nation's 10 major markets with the biggest price gains are considered overvalued, including Washington, D.C., Houston, and Miami. Chicago is also seeing a rise in housing prices, but the city is still deemed at value.
Prices and mortgage rates will likely continue to skyrocket, making housing less affordable in 2018, unless there is a noticeable increase in home construction.
Further demonstrating the massive jump in home prices, Forbes reported that the total value of all homes in the United States now adds up to $31.8 trillion, which has grown by $1.95 trillion in the past year.