The National Association of Realtors 2018 midyear forecast was released This Week in Real Estate, predicting a moderate and multi-year increase in home sales despite some headwinds. Below are a few highlights from the fourth week of May that influence our business:
* Home Sales, Prices to Rise Despite Inventory, Affordability Challenges. A stronger economy, wage growth and an improving job market are expected to march home sales and prices higher in 2018, but low supply and weakening affordability will tamper the rate of increases, according to speakers at a residential real estate forum during the 2018 Realtors Legislative Meetings & Trade Expo. Lawrence Yun, chief economist of the National Association of Realtors®, presented his 2018 midyear forecast and said despite headwinds a moderate and multiyear increase in home sales is likely ahead. After accelerating 3.8 percent in 2016, existing home sales rose only 1.1 percent to 5.5 million in 2017 and are forecast to finish 2018 at a pace of around 5.6 million (up 1.8 percent). He projects 5.7 million sales for 2019. Home price growth, up 48 percent from 2011 to 2017 and likely to rise an additional 4 percent in 2018.
* Who Is Tomorrow’s Borrower? What We’re Learning Might Surprise You. The borrower of the future is affected, and in many ways shaped, by current and emerging demographic and generational trends. For example: The digital age has allowed for work to be done from anywhere. And more Americans today work two or three different jobs, versus being full-time, salaried employees. By the year 2020, it’s estimated that 43% of all workers will be freelancers, either by choice or because of new business models. With more millennials now living with their parents than with a spouse, they represent a reservoir of pent-up demand for housing. And although some boomers are downsizing for economic reasons or moving to be closer to family, many are choosing to “age in place.” America is on track to become a “majority-minority” country. This demographic shift will result in Hispanic Americans making up 50% of first-time homebuyers by 2020. And multi-generational household trends are increasing, with children, parents and grandparents living under one roof.
* Single-Family Home Size Increases at the Start of 2018. Counter to the recent prevailing trend, new single-family home size increased at start of 2018. New home size had been falling over the last two years due to an incremental move to additional entry-level home construction. According to first quarter 2018 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area increased to 2,436 square feet. Average (mean) square footage for new single-family homes increased to 2,641 square feet. Since cycle lows (and on a one-year moving average basis), the average size of new single-family homes is 10% higher at 2,602 square feet, while the median size is 14% higher at 2,392 square feet. The post-recession increase in single-family home size is consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.