Housing Forecasts for 2018 Suggest ‘Normal’ Price Growth

Recent housing market forecasts for 2017 through 2018 suggest that home prices in the U.S. could rise somewhere between 3% and 5% over the next 12 months.

From a historical standpoint, this could be considered “normal” growth. When looking back 30 years or so, home prices in the United States tend to rise by about 3% to 4% annually — despite the occasional bubble or bust.

Housing Market Forecast Suggests Steady Growth Into 2018

Earlier in June, CoreLogic reported the results of its home price index for April, along with a housing market forecast that extends into 2018. By their estimation, house values in the United States rose by 6.9% in April 2017, compared to a year earlier.

The largest gains occurred in Washington State, Utah and Oregon. For months now, Washington has had the fastest rising house prices in the United States.

Also noteworthy: home values in 28 states have now risen above their pre-crisis peaks. This means prices in those states have never been higher than they are right now. And as home values across the country continue to appreciate, even more states are approaching their pre-crisis peak levels.

CoreLogic also offered a housing market forecasts for 2018. Based on current trends, their analysts expect U.S. home prices to rise by 5.1% over the next year. This forecast was issued on June 6, 2017.

Related: 5 markets that could beat the average

A Summary of Predictions from 100+ Real Estate Economists

Last month, the real estate information company Zillow surveyed a panel of more than 100 real estate economists and analysts. Among other things, the group offered a housing market forecast for both 2017 and 2018.

On average, the economists predicted that home prices in the U.S. would increase by 4.8% in 2017, followed by a gain of 3.65% in 2018.

Looking out even further, the group predicted that values would rise by 17.9% between 2017 and 2021.

So between these two predictions, it seems we can expect a year of normal growth. I use the word “normal” in this context to distinguish these forecasts from the above-average price gains we’ve seen over the last couple of years.

In recent years, home values in many cities have been rising rapidly, to the point that they outpaced wage and income growth. This was mostly the result of an imbalance between supply and demand. In many cities across the country, housing inventories are falling short of demand. As buyers compete fiercely for limited inventory, it puts upward pressure on home prices.

While they could ease over the coming months, inventory shortages will likely remain a factor in the housing market of 2018.

Industry Group Projects Gradual Rise in Mortgage Rates

If the prospect of rising home prices isn’t enough to create a sense of urgency among buyers, we also have a recent forecast suggesting a continual rise in mortgage rates.

Earlier this month, the Mortgage Bankers Association updated its monthly finance forecast. The industry group’s outlook covers a broad range of economic indicators, including mortgage rates.

According to their housing market forecast, the average rate for a 30-year fixed home loan could rise to 4.4% by the fourth quarter of 2017. They expect rates to continue inching upward through 2018 as well.

Collectively, these forecasts and predictions make a good case for buying a home sooner rather than later. If these projections prove accurate — or even within the ballpark — home buyers who postpone their purchases until 2018 will encounter higher housing costs.

Disclaimer: This article contains predictions and forecasts for the U.S. housing market in 2017 and 2018. These projections were made by third parties not associated with our company. The Home Buying Institute makes no claims or assertions about future housing and economic conditions.

Should You Buy a House Now, or Wait Until 2018?

In light of recent housing trends and forecasts, a strong case could be made for buying a home now instead of waiting until 2018.

We are about halfway through 2017, and that’s usually when a lot of would-be home buyers start asking the same question. Should I buy a house now, or wait until 2018?

To answer this question, you’ll need to do equal parts soul-searching and market research. And here’s what you need to know on the market side.

Should You Buy a House Now or in 2018?

Some of the important considerations when deciding whether to buy a house now or in 2018 are: home price trends, mortgage borrowing costs, and the cost of renting versus buying. So let’s take a look at each one of these factors in turn.

Home prices are slowing down, but could continue rising in most US cities.

According to a recent report from the National Association of Realtors, the median home price in the U.S. rose by 5.8% in May 2017, compared to a year earlier.

But we are starting to see a cooling trend, where home values are concerned. After a couple of years of above-average appreciation, house prices now appear to be rising more slowly.

With that being said, they are expected to continue rising — to some degree — over the next year or so. This is an important trend to watch, as it will help you decide whether to buy a house now or in 2018.

This is the kind of research that needs to be done at the local level. National trends are great for generating headlines. But as a home buyer, you need to know what’s going on in your local real estate market.

Some cities could actually “flat-line” over the next year, in terms of home price changes. Other markets could see robust growth, particularly those in the Pacific Northwest where demand currently exceeds supply. This underscores the importance of doing local market research when deciding whether to buy now or later.

Mortgage rates have leveled off, but are predicted to rise gradually going forward.

At the beginning of this year, the average rate for a 30-year fixed mortgage was 4.20%. That’s based on the weekly market survey conducted by Freddie Mac. Rates have actually come down since then, defying earlier predictions.

When measured earlier today (June 22, 2017), the average rate for a 30-year mortgage was holding steady at around 3.90%. So now might be a good time to buy a house.

But what about 2018? What might happen if you postpone your home-buying plans until next year? While no one can predict future mortgage rate trends with complete accuracy, most economists and housing analysts expect rates to inch upward due to a strengthening economy and policy changes by the Federal Reserve.

The Mortgage Bankers Association, for example, recently predicted that the average 30-year mortgage rate would rise to around 4.4% by the fourth quarter of 2017.

If home prices and mortgage rates rise, home buyers in 2018 will have less buying power than those who purchase homes now. So, based on current data and expert forecasts, a strong case could be made for buying a home now instead of waiting until 2018.

The monthly cost of renting and buying are similar in many cities.

It’s also important to look at the monthly costs associated with renting versus buying a home. We covered this topic last month, pointing out that renters in many U.S. cities could buy a home without a significant increase in monthly housing costs. In some cities, a person’s monthly housing costs would actually go down when buying a house.

Here’s a relevant quote from that previous report: “It’s still a better deal to buy a home than to rent, in most cities across the U.S. But changing economic conditions are making it a close call in some areas.”

But again, this is all location specific. Anyone considering the prospect of buying a house now, versus waiting until 2018, should research the cost of renting versus buying in their local area.

Home buyers can also gain more control over their monthly housing costs. With rent-controlled properties aside, rents are currently rising in much of the country. In contrast, home buyers who use fixed-rate mortgage loans have a lot more control over their monthly housing costs.

By opting for a fixed interest rate, a homeowner can enjoy a lot more stability in terms of monthly payments. Food for thought!

Average Credit Score for Home Buyer Mortgage Loans: 2017 Update

The average credit score among home buyers using mortgage loans was 722 in April 2017, according to the latest data. But you don’t necessarily need a FICO score of 722 to qualify for a home loan. Read on to learn why.

In April 2017, home buyers who successfully closed on their mortgage loans had an average FICO credit score of 722. This is based on the latest “Origination Insight Report” published by Ellie Mae, a company that creates mortgage loan origination software.

Ellie Mae’s reports are based on data from a “robust sampling of closed loan applications.” This means they’re a pretty good indicator of what is happening across the mortgage industry.

In addition to identifying the average credit score for home buyer mortgage loans, the company’s reports show which types of loans are used most, average interest rates, loan-to-value ratios and more.

Average Credit Score Among Home Buyers: 722

In April, the average credit score among home buyers using mortgage loans was 722. The majority of purchase loans (70%) had scores over 700.

These numbers are based on the FICO scoring scale, in particular, which ranges from 300 to 850. Higher is better, when it comes to qualifying for a mortgage loan. Generally speaking, home buyers with higher scores have an easier time getting approved for financing, and tend to qualify for lower interest rates as well.

The 722 average credit score applied to all loans that were processed and closed using the company’s software solutions and network. Here are some additional breakouts for the three most popular loan types:

  • Conventional: The average FICO score for a conventional purchase loan was 753, during April 2017.
  • FHA: The average score for an FHA-insured purchase loan was 684.
  • VA: The average FICO number for a VA-guaranteed mortgage was 708.

You’ll notice a significant difference between FHA and conventional mortgage loans. The Federal Housing Administration program requires borrowers to have a minimum score of 580, in order to take advantage of the low 3.5% down payment option. Conventional loans (which are not insured by the government) often require higher scores.

FHA loans are generally easier to obtain, when compared to conventional mortgages. This may account for the wide gap between the average FICO credit scores shown above.

You Could Get By With Less

It bears repeating: The numbers shown above are just average credit scores for home buyer mortgage loans, based on the loan origination data collected by Ellie Mae. They do not represent the minimum scores required for the different mortgage programs.

Based on our conversations with lenders, it appears that most prefer to see a score of 600 or higher for loan approval. But that number is not set in stone. Mortgage underwriting and approval is a highly individualized process. It can vary from one borrower to the next.

Additionally, mortgage lenders tend to look at the big picture regarding applicant qualifications. Down payment size, credit history, income, and financial assets all play a role as well. So a relatively low credit score, by itself, might not be a deal-breaker.

Why Do Credit Scores Matter?

Why do mortgage lenders care so much about credit scores? In a word, risk.

Banks and lenders use these three-digit numbers to get a feel for how a person has borrowed and repaid money in the past. They also look at the credit reports that are used to produce those numbers.

Credit scores are just one part of a broader risk-assessment process. In general, a borrower with a higher number will be viewed as a lower risk (a “safer bet,” if you will) compared to someone with a lower score. Having a high number can make it easier to land a home loan in the first place, and could also affect the mortgage rate you receive from the lender.

As mentioned earlier, there is no single cutoff point used across the mortgage industry. Different lenders have different business models and appetites for risk. So the minimum credit score needed to buy a house can vary from one company to the next. It can also vary based on the type of loan you choose. This is why it’s important to shop around and compare your options.

Disclaimer: This article shows the average FICO credit scores for home buyers using FHA, VA and conventional mortgage loans, as of April 2017. These figures were reported by Ellie Mae. We encourage borrowers to understand the difference between average and minimum credit scores, and to get offers from more than one lender.

Renting vs. Buying a Home in 2017: Ten Cities Were It’s a No-Brainer

Earlier this month, the real estate information company Trulia published the results of a rent-versus-buy analysis for major cities across the country. In most of the country’s major metro areas, buying is still cheaper than renting in terms of monthly costs.

In some cities like Philadelphia, Fort Lauderdale and New Orleans, there’s a big advantage to buying a house versus renting in 2017. Home buyers who purchase a median-priced property in these areas could enjoy much lower housing costs than those who pay rent.

Renting Versus Buying a Home in 2017

To determine the financial costs associated with renting versus buying in 2017, Trulia’s analysts assumed that people stay in their homes for seven years and can afford to put 20% down on a 30-year fixed-rate mortgage loan.

(Editor’s note: The seven-year staying time used for this study is fairly realistic, based on moving and relocation trends. But the down payment might be a big high. Many home buyers these days make smaller down payments.)

Using the parameters stated above, the company found that it is still cheaper to buy a home than to rent in all of the country’s 100 largest metropolitan areas. But the monthly cost gap between renting and buying has narrowed in recent months, mainly because home-price gains have outpaced rent increases in most cities.

In some areas, having a higher mortgage rate or putting less money down would shift the entire comparison, making it too close to call. But in other cities, the rent-versus-buy decision is more clear-cut.

Here are some key findings:

  • Steadily increasing home values, combined with “flat” or slower-rising rent costs, are shifting the rent-versus-buy equation in many of the largest housing markets across the country.
  • It’s still a better deal to buy a home than to rent, in most cities across the U.S. But changing economic conditions are making it a close call in some areas.
  • Within the 100 metro areas reviewed by Trulia in spring 2017, buying a home was still cheaper than renting. But it’s a broad spectrum. For example, it’s about 50% cheaper to buy than to rent in Baton Rouge. But in San Jose, California, it’s only 3.5% cheaper to buy (based on median home prices versus rents).
  • While buying is still a better deal in most metro areas, rising mortgage rates have reduced the financial advantages of purchasing a home versus renting. Slower rent growth has also contributed to this trend. Home values increased in all 100 of the metro areas that were reviewed, while rent prices had either slowed or remain stable in 93 of the metros.
  • If mortgage rates continue to climb, renting could soon be the cheaper option in high-priced housing markets like San Francisco and Honolulu.

10 Cities Where It’s a Lot Cheaper to Buy

A couple of Louisiana metro areas topped the list of places where buying is cheaper than renting in 2017. South Carolina was also well represented in these rankings. According to Zillow, “Detroit and Philadelphia are also markets where buying far outweighs renting. Here, home seekers find it at least 45% cheaper to buy than rent.”

Here are the top ten cities where it’s much cheaper to buy a home in 2017:

U.S. Metro Median Price Median Rent % Cheaper to Buy Than Rent, Spring 2017
Baton Rouge, LA $171,238 $1,400 -50.1%
Philadelphia, PA $148,712 $1,275 -48.3%
New Orleans, LA $176,360 $1,400 -47.9%
Columbia, SC $129,134 $1,150 -47.8%
Fort Lauderdale, FL $226,528 $1,800 -47.0%
Charleston, SC $226,158 $1,600 -47.0%
Greenville, SC $153,993 $1,250 -46.3%
Detroit, MI $70,031 $850 -46.2%
Birmingham, AL $130,430 $1,100 -45.8%
West Palm Beach, FL $253,719 $1,950 -45.7%

In some of the higher-priced areas of the West Coast, including San Jose and San Francisco, a slight increase in mortgage rates could make renting the cheaper option. In fact, seven of the 10 cities with the closest margins were located in California. Residents of these more expensive housing markets have a tougher decision, when choosing between renting or buying a home in 2017.

Incidentally, California’s housing markets are also tough for first-time buyers.

Disclaimer: This article uses data provided by third parties not associated with our company. The results and findings shown above are deemed reliable but not guaranteed. We have presented them here as an educational service to our readers.

These California Markets Are Tough for First-Time Buyers in 2017

California has some of the worst housing markets for first-time home buyers, according to a recent report. Orlando and Tampa, on the other hand, are two of the best markets for those buying their first home.

First-time buyers in Florida are enjoying favorable market conditions right now, with relative affordability and low competition. But in California, not so much.

A recent analysis by the real estate data company Zillow found that California is home to some of the worst housing markets for first-time home buyers. San Diego, Los Angeles, San Jose and San Francisco were all at the bottom of the list.

Related: 10 markets with inventory shortages

Best and Worst Housing Markets for First-Time Buyers

On May 12, 2017, Zillow published a report that listed some of the best (and worst) real estate markets for first-time buyers. The “best” locations where defined as those with an abundance of affordable homes to choose from, and a lower level of competition.

The company also considered the so-called “break-even horizon,” which is the number of years a person would need to live in a home before buying made more financial sense than renting it.

Here are some highlights from their report:

  • The Southeast and Midwest offer some of the best housing markets for first-time home buyers, as of spring 2017.
  • Two Florida cities, Orland and Tampa, topped the rankings as best cities for those purchasing their first house. These cities have comparatively low home prices, plenty of inventory, and a relatively short break-even horizon.
  • The four worst housing markets for first-time home buyers were all located in California. These cities have much higher prices (on average), severe inventory shortages in some cases, and fierce competition.
  • California’s San Francisco Bay Area is one of the toughest areas for first-timers. In terms of dollar amount, a 5% down payment in the Bay Area is larger than a 20% down payment in most of the best markets for first-time home buyers.

California Markets Are Tough to Break Into

At the bottom of Zillow’s list of tough markets for first-time buyers, we find the following California metro areas:

San Diego — According to the report, San Diego had a median home price of $532,000. That was the lowest of the four “worst” housing markets for first-time buyers. But the break-even horizon in San Diego was 4 years, 6 months. Theoretically, that’s how long a buyer would need to stay in a home before it made more sense financially than renting. The economists at Zillow expect home prices in the area to rise by 0.9% between now and spring 2018.

Los Angeles — The median home value in Los Angeles was $601,900, as of May 2017. The break-even point (where buying becomes a better value than renting) was similar to San Diego’s. The company’s one-year forecast for Los Angeles home prices called for a modest gain of 0.8% over the next 12 months.

San Jose — With a median price of $986,000, San Jose is one of the most expensive real estate markets in California, and one of the toughest for first-time home buyers to break into. The break-even horizon there is longer than five years. Tight inventory and high demand make San Jose a highly competitive housing market for first-time buyers in 2017.

San Francisco — This metro area’s median home price was $843,200, according to Zillow. Within the city itself, the median value has risen above $1 million. The company’s analysts expect home prices in the area to remain more or less flat over the next year, so buyers probably shouldn’t expect much equity growth. The San Francisco real estate market has some serious affordability issues in 2017, so home prices there are basically bumping into a ceiling right now.

Now Florida, on the Other Hand…

At the other end of the spectrum, we find housing markets with less competition and lower prices. These metro areas are much more accessible for those buying a first house.

The best real estate markets for first-time buyers in 2017 include the following:

  1. Orlando, Fla.
  2. Tampa, Fla.
  3. Indianapolis, Ind.
  4. Las Vegas, Nev.
  5. San Antonio, Texas
  6. Pittsburgh, Pa.
  7. Atlanta, Ga.
  8. Detroit, Mich.
  9. Dallas, Texas
  10. Cleveland, Ohio

The real estate markets shown above are generally less competitive, with plenty of affordable properties for sale. Additionally, the company’s forecasts suggest that first-time home buyers in these cities will see strong price growth over the next year, allowing them to accumulate equity.

5 Housing Markets Where Home Prices Could Outpace the Nation in 2018

Recent housing market forecasts suggest that home prices nationwide will continue rising over the next 12 months, at least in most parts of the country. But the gains will probably be smaller than those recorded over the last 12 months. As for high performers, the five cities below could outpace the nation in terms of year-over-year price growth through 2018.

5 Housing Markets With Above-Average Forecasts: 2017 – 2018

According to the real estate analysts and economists at Zillow, home prices in the U.S. are expected to rise by around 2.6% over the next 12 months, extending into April 2018.

But some cities could see larger gains as a result of strong demand and a limited supply of homes. Here are five housing markets that are forecast to outpace the nation over the next year, where house values are concerned.

Bridgeport, Connecticut: 5.2%

Starting in the Northeast, we have the real estate market of Bridgeport, Connecticut. Bridgeport is expected to see above-average price increases into the first part of 2018.

The median home value in this relatively affordable housing market was $165,200, as of April 2017, after a gain of around 10% over the last year. Zillow’s economists expect prices to rise by more than 5% over the next 12 months, nearly double the national outlook for the same period.

Dallas, Texas: 5.8%

According to a recent article on DallasNews.com: “All but five of the 45 Dallas-area residential districts that The Dallas Morning News tracks each quarter had home sales price hikes [over the last year], according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems.”

When looking at the first quarter of 2017 compared to the same period last year, the biggest home-price gains occurred in DeSoto (25%), Lancaster (22%), southern Dallas (22%) and the Park Cities (22%).

Across the city as a whole, Zillow reported a 15.4% increase in median home prices over the last year, and predicts the housing market will appreciate by nearly 6% over the next year.

Sacramento, California: 5.4%

Earlier this year, Zillow published a list of what it felt would be the ten hottest housing markets of 2017, in terms of price growth. Sacramento, California was ranked #10 on their list, out of the 100 largest metro areas in the country.

According to the company’s research team, home prices within the Sacramento housing market rose by 11.3% over the last year, and are expected t0 climb by another 5.4% over the next 12 months.

Seattle, Washington: 5.1%

The Seattle housing market has generated a slew of headlines over the last couple of years, mainly due to the high level of competition among home buyers. (It was also ranked in the #2 spot, on the list of “hottest markets” mentioned above.) Housing inventory is tight in Seattle, while demand continues to grow from population growth.

According to Zillow, home prices in the city rose by 12.2% over the last 12 months. Looking forward, the company has forecast a gain of 5.1% between now and April 2018.

Tampa, Florida: 4.5%

Home prices in the hot Tampa, Florida housing market rose by a whopping 15% over the last 12 months, according to the team at Zillow. To put that in perspective, historically “normal” appreciation is somewhere around 3% annually. So the Tampa housing market has experienced some seriously above-average price gains in recent months.

Going forward, Zillow expects home value appreciation to slow considerably. They’ve predicted that the median price for houses in Tampa will rise by 4.5% from April 2017 to April 2018. While that does signal a cooling trend, it’s still higher than the company’s national outlook (for a 2.6% price gain over the next 12 months). So the Tampa real estate market deserves a spot on our list of high performers.

Disclaimer: This story contains housing market forecasts and home-price projections that were provided by third parties not associated with our company. The Home Buying Institute makes no claims, assertions or guarantees about future real estate tends.

Mortgage Rate Forecast for April 2017 – 2018: A Slow Climb Ahead?

Home buyers got some good news last week, regarding mortgage rates. According to the weekly survey conducted by Freddie Mac, the average rate for a 30-year fixed mortgage loan dropped by 11 basis points (0.11%) last week, landing at 3.97%. That marked its lowest point of 2017, and the lowest level since November of last year.

But that’s just a short-term trend. The latest long-term forecast for mortgage rates suggests that they could inch upward between now and the end of 2017, bringing higher borrowing costs for home buyers who delay their purchases.

Revised Mortgage Rate Forecast for April 2017

On April 18, the Mortgage Bankers Association (MBA) published its latest mortgage rate forecast extending through the end of 2017 and into 2018. By their estimation, the average rate for a 30-year fixed mortgage (the most poplar type of home loan) will rise to 4.6% by the fourth quarter of 2017. Furthermore, they expect the benchmark 30-year rate to climb above the 5% threshold sometime around the middle of 2018.

As a result of this mortgage rate forecast, the industry group expects home refinancing activity to decline through the rest of 2017. Home purchases, meanwhile, will continue to dominate the mortgage market with more than twice as many loan originations, when compared to refinances.

Federal Reserve Tweaks Its Monetary Policy

The Federal Reserve has a part in all of this. After years of keeping the short-term federal funds rate near 0%, Fed officials are now raising it in small increments. This is the result of their improved outlook regarding the economy. After its last major policy meeting, which took place in March 2017, the Federal Open Market Committee stated:

“The Committee expects that … economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term … In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent.”

Additional rate hikes are possible, according to at least one source close to the matter.

The Federal Reserve does not control mortgage rates directly. The interest rates assigned to home loans are primarily driven by market forces. But the Fed’s policies can have an indirect effect on mortgage pricing, by shifting demand among investors. In short, when the Federal Reserve raises the short-term federal funds rate (which applies to inter-bank transfers), mortgage rates tend to go up as well.

This is partly what accounts for the MBA mortgage rate forecast, which calls for a gradual rise through 2017 and into 2018.

Bucking Predictions, Rates Have Dropped in Recent Weeks

Despite a previous increase for the federal funds rate, and additional hikes looming on the horizon, home mortgage rates have actually dropped in recent weeks. According to the nationwide industry survey conducted by Freddie Mac, mortgage rates have fallen steadily for the last five weeks are are currently 23 basis points (0.23%) lower than they were at the beginning of 2017.

The average for a 30-year fixed mortgage fell to 3.95% last week, down from 4.20% during the first week of this year. So they’ve defied predictions that were made at the end of last year.

This is something to keep in mind going forward. The MBA’s latest forecast for mortgage rates predicts a gradual increase through the rest of 2017 and into 2018. But they’ve been wrong with these predictions in the past.

10 Housing Markets Where Inventory Is Way Down in 2017

A recent report from Trulia revealed that the number of homes for sale in the U.S. has dropped significantly over the last five years. During the first three months of 2017, inventory nationwide dropped to its lowest level on record.

Housing markets like Salt Lake City, Seattle, San Diego, and Nashville are really feeling the crunch, with inventory dropping by more than 60% since 2012.

Low Inventory Makes Home Buying ‘Season’ More Competitive

In March, the real estate information company Trulia published a report on housing supply in America. Specifically, they looked at the supply of homes listed for sale across the country, and also in the 100 largest metropolitan areas.

Their analysis revealed that the housing markets with the biggest increases in home prices have also experienced significant reductions in the supply of homes for sale. Buyers in these cities and metro areas face stiff competition and often have a harder time finding properties, due to a dearth of inventory.

According to Trulia’s analysis, the number of homes on the market nationwide dropped again during the first quarter of 2017, marking eight consecutive quarters of declining inventory. Starter homes (at the bottom of the pricing spectrum) fell the most, with a decline of 8.7% over the last year alone. The supply of higher-end or “premium” homes was more stable by comparison, with a decline of just 1.7% over the past year.

Related: Home price forecast for 2017

Shrinkage: 10 Cities Where Supply Is Way Down

Here are the ten U.S. housing markets with the largest decreases in for-sale inventory since 2012. The percentage beside each city shows how the number of homes for sale has changed over the last five years.

  1. Salt Lake City, Utah: -69.5%
  2. Seattle, Washington: -66.6%
  3. San Diego, California: -66.5%
  4. Nashville, Tennessee: -66.0%
  5. San Jose, California: -63.5%
  6. Colorado Springs, Colorado: -62.1%
  7. San Francisco, California: -62.0%
  8. Cambridge, Massachusetts: -61.9%
  9. Grand Rapids, Michigan: -61.9%
  10. Tacoma, Washington: -61.6%

Home buyers in these ten housing markets are facing increased competition due to limited supply. The housing inventory crunch in these markets has also boosted home prices. In many of these cities, house values have risen above the peak levels seen during the last housing boom.

According to a related press release: “A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years. Housing markets — including San Francisco, Seattle, Nashville, and Colorado Springs — which have had greater home value recovery since 2012 have experienced larger decreases in inventory.”

Home prices in Seattle, for example, are currently 12% higher than they were during the housing boom of the early to mid 2000s. In Nashville, another hot housing market with limited inventory, prices are 20% higher than their pre-recession peak.

San Francisco, which has been called one of the most overvalued housing markets in the country, has rebounded even further. Home prices there are about 32% higher than the last peak, according to Trulia’s report.

How to Succeed in a Tight Housing Market

Home buyers in these ten housing markets — and other cities with limited inventory — need to bring their ‘A’ games when entering the market. Competition is high, and supply is low. This is especially true in the “starter home” price range, which is where most first-time home buyers tend to shop.

Here are some tips for succeeding in a housing market with limited inventory:

1. Get a real estate agent. An experienced agent can help you move quickly when the right property comes along, by making a sound offer based on current market conditions. Making a reasonable offer is always important, but even more so in a housing market with limited inventory and stiff competition among buyers.

2. Don’t sweat the small stuff. Going back and forth with a seller over minor inspection issues — or small difference between the asking and purchase price — could put the entire deal in jeopardy. This is especially true in a hot housing market with limited inventory, like the ones listed above. So be flexible. Keep the big picture in mind. Don’t sweat the small stuff. There’s probably another eager buyer right behind you, or several of them.

3. Remember who holds the cards. This an extension of tip #2 above. In a tight housing market, with limited supply and high competition, sellers have most of the bargaining power. That’s real estate reality. Ask for too many concessions from the seller, like a contribution toward your closing costs, and they might skip your offer in favor of the next one. Home buyers should be careful what they ask for in a sellers’ market.

Trump & Housing: President Hammers Middle Class With FHA Insurance Reversal

President Donald Trump, who paints himself as a champion of the middle class, hammers middle-income home buyers with FHA policy reversal.

Within hours of being inaugurated, Donald Trump took a swipe at low-income and middle-class Americans — many of whom voted for him — by scrapping a planned mortgage fee reduction for FHA loans.

In January, then-president Barack Obama approved the reduction, which would have saved FHA borrowers an average of $500 per year. But the mortgage insurance reduction was short-lived. In one of his first acts as president, Donald Trump decided to keep FHA mortgage insurance rates at the higher level.

As a result of Mr. Trump’s decision, home buyers who use FHA loans in 2017 (and possibly beyond) will continue to pay the higher premium, and some will simply be priced out of owning a home.

It was a strange move for a brand-new president who, while on the campaign trail, often painted himself as a champion of the middle class. The Home Buying Institute views Trump’s policy reversal as an error in judgment, and an unnecessary shift given the FHA’s current financial health.

Here’s how we got to this point.

FHA Insurance Fees Were Raised After the Housing Crisis

The Federal Housing Administration (FHA) insures home loans made by mortgage lenders in the private sector. This insurance protects lenders against financial losses that result when homeowners default and stop making their mortgage payments.

The FHA suffered tremendous losses during the housing market collapse and subsequent recession. They paid out so many insurance claims to mortgage lenders that their capital reserves were wiped out.

In order to restore their capital reserves, which are required by Congress to stay a certain level, the FHA raised its mortgage insurance fees starting in 2014. This, along with other policy changes, helped put the FHA back into the black and restored the agency’s capital reserves to the required level.

In 2016, the Department of Housing and Urban Development (HUD) reported to Congress that the FHA’s Mutual Mortgage Insurance Fund capital ratio rose to 2.32%, and that it “exceeded the congressionally required 2 percent threshold.”

HUD and Obama Reduced Fees When FHA Recovered

Now jump ahead to January 2017. During that month, HUD officials, with a blessing from the Obama administration, announced they would reduce the annual mortgage insurance premium home buyers pay when using FHA loans.

The reduced insurance rate would have applied to most borrowers using the program to buy a home in 2017, saving them an average of $500 per year (though sometimes much more than that).

Essentially, HUD and President Obama were bringing the Federal Housing Administration back in line with its primary purpose — to make homeownership more affordable to more Americans, particularly those in the lower and middle income brackets, and those with less-than-perfect credit scores.

But thanks to Donald Trump, the FHA insurance fee reduction never came to pass. This will affect the housing market in 2017 by reducing access to mortgage financing.

Donald Trump Scrapped It Shortly After Taking Office

On his first day in office, Donald Trump halted the planned reduction in FHA mortgage insurance. Trump’s executive order, signed within hours of his inauguration, kept the cost of government-backed mortgage insurance at the elevated level put in place after the housing crisis. In other words, it prevented FHA insurance premiums from dropping back down to pre-crisis levels.

Trump offered no explanation for the move. It happened swiftly and without any fanfare, below the radar of average Americans. Perhaps it was part of his often-touted plan to eliminate “all things Obama.” Maybe it was the brainchild of Stephen Bannon, Trump’s top advisor who wants to dismantle what he refers to as the “administrative state.”

It’s hard to say what the true motivation was, given the current administration’s penchant for misinformation and “alternative facts.”

Trump’s controversial housing market decision could affect a large number of moderate-income and middle-class home buyers in 2017, because the FHA loan program is very popular among this demographic. The Federal Housing Administration backed about 17% of all mortgage loans made in the U.S., according to the most recent figures published by HUD. Most of those were first-time buyers seeking a low down payment (FHA allows for a down payment of 3.5%).

Add to this the fact that home prices have been rising across the country in recent years, and you essentially have a plan for reduced homeownership among the lower and middle income brackets.

According to Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute: “The FHA does a disproportionate amount of loans for first-time buyers, minority buyers, low-income buying; it’s hugely important.”

The National Association of Realtors (NAR) estimated that 30,000 to 40,000 Americans who would have been able to afford a home purchase with the anticipated lower fee will now be unable to buy a house. Another 700,000 to 800,000 buyers will end up paying more for their mortgage insurance than they would have if the Obama-era reduction had been allowed to take place.

The NAR has since lobbied the Trump administration to reinstate the premium cut “as soon as possible.”

It is somewhat ironic that Donald Trump scrapped the insurance reduction. During his presidential campaign, he often lamented about how the middle class in American was getting “crushed.” Why, then, would he sign an executive order to crush them further?

Forecast: Phoenix Home Prices to Keep Rising Into 2018

According to a recent forecast from the real estate data company Zillow, the Phoenix housing market could continue appreciating well into the first part of 2018.

But homeowners in the areas probably shouldn’t expect the kind of home-price appreciation seen over the last year. House values in the Phoenix appear to be rising more slowly in 2017 than they did in 2016.

Phoenix Housing Forecast: Prices Rising Through March 2018

As of March 2017, the median home price in Phoenix, Arizona was just over $200,000 — and rising. The housing economists at Zillow predicted in March that the median home price in Phoenix would rise by 3.5% over the next 12 months (through March 2018). That’s roughly equivalent to the national average for annual housing appreciation going back decades.

As Zillow stated in March: “Phoenix home values have gone up 9.4% over the past year and Zillow predicts they will rise 3.5% within the next year.”

Phoenix homeowners might consider this relatively low forecast a negative sign, but it’s actually a positive. Above-average price increases are generally not sustainable over the long term, especially when they far exceed wage and income growth. Under such conditions, housing markets become unaffordable to an increasing number of residents.

An ‘Overheated’ Real Estate Market?

A February 2017 report by Fitch Ratings suggested that the Phoenix real estate market was “overheated.” According to the report: “home price growth in parts of the western U.S. … is exceeding supporting economic fundamentals. Of particular focus for Fitch are home prices in major metro areas like Dallas, Las Vegas, Phoenix and Portland, which are overpriced by 10% – 14%.”

Related: Marketing for Phoenix real estate agents

Granted, Phoenix is still relatively affordable compared to a lot of other big cities across the country. In fact, the city was recently ranked #7 on a top-ten list of most affordable big cities for U.S. home buyers, by the mortgage information website HSH.com.

Still, the more moderate forecast for Phoenix’s housing market, extending through 2017 and into 2018, is a good sign. It suggests a return to normalcy after years of tumultuous fluctuations. It’s a more sustainable pace for home-price appreciation.

Study: Buyers Need $46,000 to Afford a Median-Priced Home

According to HSH.com, buyers would need to earn around $46,000 per year to afford a median-priced home in Phoenix, Arizona. That’s with a down payment of 20%. If a home buyer puts down 10%, the salary needed to buy a home would increase to around $54,000.

Like home prices, mortgage rates have also risen over the last year or so. On March 9, 2017, Freddie Mac reported that the average rate for a 30-year fixed-rate mortgage loan was 4.21%. That’s up from 3.68% the same time last year. So Phoenix home buyers are currently paying more for houses and for mortgage loans, compared to a year ago.

The bottom line: Forecasts for the Phoenix real estate market suggest that home prices will continue rising throughout 2017 and into the first part of 2018, but at a slower pace compared to last year. According to some economists, this is a much-needed change that could prevent the Phoenix housing market from becoming too “overheated.”

Disclaimer: This story includes housing market and home price forecasts for Phoenix, Arizona, through 2017 and into 2018. These forward-looking statements were provided by third parties not associated with our company. The Home Buying Institute (HBI) makes no claims or assertions regarding future housing conditions.