Here are 6 Housing Predictions to know for 2018

The latest report from realtor.com shows the market will begin to see more manageable increases in home prices and a modest acceleration of home sales. Analysts from the real estate listings website also predict Millennials will begin to increase their market share of homeownership in 2018.

However, realtor.com experts are still unsure what the impact will be from tax reform legislation currently being debated in Congress.

“We are forecasting next year to set the stage for a significant inflection point in the housing shortage,” said Javier Vivas, realtor.com director of economic research. “Inventory increases will be felt in higher priced segments after home buying season, which limits their impact on total sales for the year. As we head into 2019 and beyond, we expect to see these inventory increases take hold and provide relief for first-time home buyers and drive sales growth.”

The forecast shows that while existing home sales will increase slightly, new home sales will see the most significant increase, fighting against the low levels of affordable housing inventory. And other experts agree.

Home sales are expected to increase slightly in 2018 as new home sales take over the market, according to Freddie Mac’s monthly Outlook for September.

Here are realtor.com’s six major predictions for the housing market in 2018:

1. Home price appreciation – Home prices are expected to rise 3.2% next year. This slower rate of increase will allow for home sales to pick up next year.

2. Mortgage rates – Mortgage rates are expected to average 4.6% throughout the year, but reach 5% for the 30-year fixed-rate mortgage by the end of the year. The Mortgage Bankers Association also predicted rates will continue rising, saying mortgage rates could pass 4% or even 5% over the next few years.

3. Existing Home Sales – Existing home sales are forecasted to rise 2.5% as the trend in low inventory begins to reverse course.

4. Housing Starts – Even as existing home sales increase, new home sales will increase even more, meaning housing starts will also rise. Overall, housing starts are predicted to rise 3% over the year, but single-family home starts will increase 7%.

5. New Home Sales – These will increase at the same rate as housing starts, rising 7% year-over-year in 2018.

6. Homeownership Rate – The homeownership rate will stabilize at 63.9% after having hit bottom in the second quarter of 2016, realtor.com forecasted.