January 25, 2018
Buyer’s vs. Seller’s Market: Which Will it be This Year?
2017 brought historically low levels of home inventory and the prediction for this year is not much different.
Inventory will continue to be below normal and demand will continue to be extremely high. This year will bring another year of scarcity of homes on the market making it convenient for private and institutional sellers to keep prices high. Our prediction is 2018 will be the year of the seller. However, do not let our prediction scare you away from buying a home this year there is still plenty of hope for buyers, just keep reading.
In 2017, we saw an increase in millennial first-time homebuyers and this year that will increase even more.
In 2017, we saw an increase in millennial first-time homebuyers and this year that will increase even more. There are continually more and more young professionals starting a career, starting a family and wanting to purchase a home. There will be a shortage of supply relative to the number of millennials buying their first home. With a shortage of home listings and a 2018 prediction of mortgage rates increasing, millennial homebuyers will have an increase in fear of not being able to find a house they can afford. It is predicted that mortgage interest rates will be increasing to 4.5% by the end of 2018 that along with the changes to the tax code makes it so consumers will only be able to afford so much. This makes buyers prepared to challenge sellers without backing down. Sellers need to be prepared for potential buyers to not accept overpricing of homes and challenge the seller.
In Minnesota, we are experiencing very similar trends to the rest of the housing markets across the U.S. We are seeing low supply, high demand, and high prices. One particular area we are seeing prices rising is in the new home construction market. Over the past decade there has been a slow rate of new home building. This decade long trend changed in 2017 with a large increase in new housing construction and we will continue to see this increase even more in 2018. This is a great new trend but does have some downfall. With continued growth in the new housing construction industry there is continued rise in the pricing. It is very hard to find any new single-family homes being built with a starting price in the low to mid 200s, prices are starting in the high 200s and more consistently the low to mid 300s. Builders are having to search for more affordable land making new houses further out of the way but the real question is will millennial homeowners be willing to accept a further commute to work in trade for a more affordable starter home?
Starter homes will continue to be in favor of the seller with supply way below average. We will see a more even playing field between the seller and buyer on the coastal regions like California and New York where the average housing prices are much higher and there is a higher demand for luxury homes. The luxury home market in these regions is predicted to be more even between the buyers and sellers.