Outlook: What Will the U.S. Real Estate Market Do in 2019?

We’ve passed the midpoint of 2018, which means some home buyers are starting to look ahead to next year. And a lot of them share the same questions: What will the real estate market be like in 2019? Will home prices keep rising, level off, or drop next year? Will it be a buyers’ or sellers’ market in 2019?

4 Things the Real Estate Market Might Do in 2019

Tight supply and strong demand have boosted home prices in housing markets across the country, while presenting challenges for buyers. Mortgage rates rose steadily during the first part of 2018, and then leveled off during the early summer.

That’s where we are now, as of July 2018. But what’s over the horizon? While no one can predict future housing conditions with complete accuracy, we can make a few educated guesses. Here are four of them.

1. We could see an increase in new-home construction.

We’ve seen a recent uptick in building permits nationwide, which could lead to a much-needed increase in new-home construction in 2019.

In a June 2018 report, the National Association of Home Builders stated: “Over the first four months of 2018, the total number of single-family permits issued nationwide reached 279,302. On a year-over-year basis, this is an 8.4% increase over the April 2017 level of 257,719.”

But there’s a pretty long lag time between the filing of a construction permit and the completion of the project. So the U.S. real estate market in 2019 will probably continue to suffer from supply shortages, with not enough homes listed for sale to satisfy demand from buyers. Which leads to item #2 below.

2. Most markets will still favor sellers over buyers.

Inventory shortages affected many housing markets across the country during 2017 and 2018. And this will likely continue, to some extent, in 2019 as well. Limited supply is also one of the reasons for prediction #4 below. An imbalanced supply-and-demand picture will continue to put upward pressure on home prices in 2019.

Of course, all of these trends can vary from one area to the next. Some real estate markets across the U.S. are more “balanced” than others, with enough supply to meet demand. Most cities, however, are experiencing low levels of inventory at present. The tightest markets are in the west — California, Washington and Oregon. But nearly every state is touched by this.

3. Mortgage rates could approach 5%, for a 30-year loan.

Here’s the short version: Mortgage rates are higher now than they were at the start of this year, and experts are predicting they’ll climb even higher by the end of 2018.

Here’s the back story: The average rate for a 30-year fixed mortgage hovered below 4% for much of 2017. Then, at the start of 2018, it began a steady upward climb that lasted for three months. When this article was published, on July 6, 2018, the average 30-year mortgage rate was 4.52%. That was an increase of 57 basis points (0.57%) from the first week of January.

So clearly, rates are higher now than at the start of the year. The question is, what might they do going forward? And what will the real estate market do in 2019 if mortgage rates climb even higher?

In June 2018, the Mortgage Bankers Association (MBA) updated its long-range forecast. They predicted that average 30-year mortgage rates would rise to 4.9% by the fourth quarter of 2018, and inch upward in 2019 as well. Economists from Freddie Mac made a similar prediction recently.

Update: mortgage trends to watch in 2019

What might the real estate market do in 2019, in response to rising rates? Well, assuming that event actually happens, we could see a decline in home purchases in the months ahead. But we don’t expect it to have a major impact on real estate sales.

The economy is strong and employment is high, so there is steady demand for homes in most housing markets across the country. A modest rise in mortgage rates probably wouldn’t do much to dampen it.

4. Home prices will continue rising in most U.S. cities.

Given the current supply-and-demand situation, it appears likely that home prices in most U.S. cities will continue to rise throughout 2019. This would be the continuation of an ongoing trend, rather than a new development.

According to Zillow, the median home price in the U.S. rose by 8.1% over the past year. They predicted that prices would rise by 6.5% over the next 12 months. This forecast was issued in July 2018 and therefore extends into the summer of 2019.

Of course, this too varies by region. Some cities might experience relatively small gains, while others could see a large jump in home prices. The biggest gains will likely be recorded in real estate markets with strong demand and short supply, like those in the Pacific Northwest and a few other areas.

Disclaimers: This article attempts to answer the question, What will the U.S. real estate market will do in 2019? These predictions are the equivalent of an educated guess. No one can predict future real estate trends with complete accuracy. This article is intended for educational purposes only and does not constitute financial advice.

A ‘Normal’ Forecast for U.S. Home Prices Through Spring 2019

A team of housing analysts and economists have offered a U.S. home-price forecast extending into spring 2019 that’s fairly “normal” by historical standards. This follows several years of above-average price growth within the nation’s housing market.

U.S. Home Price Forecasts Through Spring 2019

Home values across the country have been rising steadily for the last few years. In many cities and towns, this is the result of limited inventory and strong demand. Prices have risen at an above-average pace for the last couple of years, according to numerous sources.

In May 2018, the real estate information company Zillow reported that the median home value for the nation as a whole rose by 8% over the previous 12 months. Those are above-average gains, when you look at annual appreciation over the last few decades. Historically, home prices in the U.S. have risen by around 5% annually.

Some cities experienced double-digit price growth during 2017, as well as the year before. For instance, prices in Atlanta, Georgia rose by 12.4% over the last year, according to Zillow. In Seattle, the median home value climbed by a whopping 17% during that same period. Those are extreme cases of annual price growth. We’ve seen similar “abnormal” trends in many other cities across America.

And that brings us to the latest home-price forecasts for the U.S. Recent predictions suggest that year-over-year appreciation might be slowing to a more “normal” pace.

Economists from Zillow, for example, recently offered a forecast for 4.2% growth over the next 12 months or so. This outlook was issued in May 2018 and therefore extends into the spring of 2019.

According to the company’s website: “United States home values have gone up 8.0% over the past year and Zillow predicts they will rise 4.2% within the next year.” (Quote obtained on May 17, 2018)

The nationwide median price was up to $213,000 as of May 2018.

An Unbalanced Supply-and-Demand Situation

While the latest round of U.S. home-price forecasts suggests that there is some normalizing within the housing market, the inventory situation remains abnormal. In many cities across the country, real estate markets are experiencing an unusually low level of supply right now.

In such markets (and there are a lot of them), there just aren’t enough homes listed for sale to meet the demand from buyers. This is putting upward pressure on prices, and it’s partly why house values have risen so much over the last couple of years.

According to economists and housing analysts, a “balanced” and healthy real estate market has somewhere between five and six months of supply. This means it would take five to six months to sell off all properties currently listed for sale, if no new ones came onto the market in the meantime — theoretically speaking.

As of spring 2018, most cities across the U.S. had less than a five-month supply of homes for sale. Some cities are well below that level. Some of the tightest markets — like Seattle, Sacramento and Denver — had less than a two-monthly supply of homes for sale, as of April 2018.

This is partly why the latest U.S. home-price forecasts, extending into 2019, are calling for additional gains over the coming months. Short supply and steady demand are putting upward pressure on home prices, and these conditions could carry over into 2019 for many U.S. cities.

Still, it’s good to see some home-price forecasts calling for somewhat normal growth over the next year. House prices need to cool down a bit, for the sake of long-term sustainability and affordability.

Disclaimer: This article includes trends, predictions and forecasts relating to house values in the U.S. These forward-looking statements were provided by third parties not associated with our company. As a general rule, the Home Buying Institute makes no claims or assertions about future conditions with the real estate market or broader economy.

Forecast: Grand Rapids Housing Market Experiencing Inventory ‘Crisis’

Summary: Inventory is still lacking within the Grand Rapids, Michigan real estate market, and forecasts suggest that this will boost home prices through 2018 and into 2019.

In 2017, a real estate report published by Realtor.com singled out Grand Rapids as having one of the tightest housing markets in the country. Back then, the city had one of the lowest inventory levels of homes for sale.

According to the January 2017 report: “Since late 2010, the city has experienced net in-migration for the first time in a decade, creating way more housing demand. Twice in 2016, Grand Rapids even made it onto our monthly list of hottest markets.”

Well, here were are in spring of 2018, and not much has changed. The Grand Rapids real estate market still has inventory levels that are well below what is considered to be normal. So it’s no surprise that economists are issuing housing forecasts calling for additional price growth in this market.

A Lot of Demand, Not Enough Supply

Housing analysts and economists say that a “balanced” real estate market has around five to six months worth of supply. In theory, that’s how long it would take to sell off all of the housing stock currently listed for sale, if no new properties came onto the market in the interim. This metric gives us better insight into local real estate conditions in cities across country.

According to the latest MLS data and real estate reports, Grand Rapids, Michigan had about a 0.9-month supply of homes for sale as of March 2018. You read that right. The city had less than a one-month supply of homes earlier this year. (You’ll recall that a supply of five to six months is considered normal and balanced.) So clearly we are talking about a very constrained real estate market with limited inventory.

By comparison, Lansing and Detroit both had more than a three-month supply of homes for sale during that same month. The nation as a whole was slightly below the three-month mark in March of this year.

Forecast for Grand Rapids Housing Market: Price Growth

Given these tight inventory conditions, it’s no surprise to see Grand Rapids housing market forecasts that call for rising prices through 2018 and into 2019.

Zillow is just one of several sources that have issued positive predictions for the city. As of May 2, 2018, the company was reporting a median home value of $181,447 for the Grand Rapids real estate market. That was an increase of 10.2% over the same month a year earlier. Looking forward, Zillow’s economists forecast that the median home value in the area will rise by 4.9% over the next 12 months or so.

In April 2018 Ryan Ogle, president of the Greater Regional Alliance of Realtors, told Michigan Radio that the Grand Rapids housing market is experiencing an “inventory crisis” — his words. He said that local real estate professionals are also referring to it as a “logjam.”

There are more buyers than sellers, which makes the market very competitive for those seeking a home. And those homeowners who are thinking about selling often won’t even list their homes until they can find somewhere else to live. And so the cycle perpetuates itself.

While there is ongoing construction within the local housing market, it’s currently not enough to correct the supply-and-demand imbalance. When asked how long it might take for the this market to “balance out,” Ogle told Michigan Radio that it could be two years or more, due to the lengthy nature of the home-building process.

Disclaimers: This article contains predictions for the Grand Rapids, Michigan real estate market through 2018 and into 2019. Projections, data and commentary were provided by third parties not associated with the Home Buying Institute. As a general rule, we make no claims or assertions about future housing conditions.

Dallas Housing Forecast for 2018: Is It Getting Back to ‘Normal’?

According to a new report from Realtor.com, Dallas is currently one of the hottest housing markets in the United States. But things might cool down a bit over the coming months. Recent forecasts for the Dallas housing market, extending into the fall of 2018, suggest that home-price appreciation will slow.

Here’s a look at the latest trends, predictions and projections for the DFW real estate market, stretching into 2018.

Realtor.com: Dallas One of the 20 Hottest Markets

On September 28, 2017, Realtor.com put out its latest list of the 20 “hottest markets for real estate” in the United States. The company’s economists look at a variety of indicators relating to housing supply and demand, and then rank the 20 cities or metro areas with the hottest markets.

By their estimation, Dallas, Texas was one of the hottest housing markets in the country for September 2017, appearing at #12 on their list. It’s been on the list for several months.

House prices in Dallas have risen steadily over the last couple of years. According to the real estate information company Zillow, the median home value in Dallas rose by nearly 8% over the last 12 months alone (ending in October 2017).

According to the North Texas Real Estate Information System, the average price for a single-family home purchased in the Dallas area reached $299,731 as of August 2017. That was 7% higher than the same month a year earlier.

A Real Estate Market Forecast for 2018

A recent Zillow forecast for the Dallas real estate market suggests that prices could slow down a bit over the coming months. The company’s 12-month outlook predicts that the median home value will rise by 4.1% between now and October 2018. That would be about half of the growth from the previous 12 months, by their estimation.

To put this in perspective, “average” home price growth over the last few decades is somewhere between 3% and 5%. So perhaps what we are seeing here is a normalization within the Dallas real estate market.

The nearly 8% growth recorded over the last year or so is abnormal, as it outpaces wage and income growth. That kind of depreciation is generally not sustainable over a long period of time, because it creates affordability issues within the housing market. So a slowdown of home prices within the Dallas real estate market could be viewed as a positive trend, from an economic standpoint.

Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University, recently echoed this sentiment in comments to The Dallas Morning News. According to Dr. Gaines:

“You still got a good [real estate] market, just a little slower than what we’ve seen recently. Things are getting back to normal.”

Inventory Still Tight Across the DFW Metro Area

Here’s another prediction for the Dallas real estate market in 2018. Home buyers entering the market next year will encounter limited inventory and stiff competition from other buyers. That’s the situation right now, and those trends will probably continue in 2018.

A so-called “balanced” real estate market is said to have around five to six months worth of supply. Recent reports showed that the Dallas metro area had a 2.3-month supply of homes for sale, as of September 2017.

This is partly why prices have risen so much over the last couple of years. There are plenty of buyers in the market, but limited inventory. Home values tend to rise steadily under such conditions.

The overall supply-and-demand situation in Dallas has been relatively flat over the last few years, but inventory increased a bit during 2017. Increased construction could create a better balance between supply and demand in 2018.

So while we expect to see (continued) constrained inventory conditions in 2018, buyers might have increased options when it comes to finding a home.

Here’s the general consensus among housing analysts and economists. The Dallas real estate market is hot right now, but it could begin to cool a bit over the coming months. While home prices are expected to continue rising into 2018, the year-over-year gains will likely be smaller than in the past. Translation: things might be getting back to normal after a couple of years of overheated growth.

Disclaimer: This article includes various predictions and forecasts for the Dallas, Texas housing market through 2018. These forward-looking statements were provided by third parties not associated with our company. The Home Buying Institute makes no claims or assertions regarding future housing conditions.

Los Angeles, CA Real Estate Prediction: Will Prices Cool in 2018?

A new forecast for the Los Angeles housing market suggests that home prices could rise considerably slower over the next year than the previous 12 months, settling into a historically average rate of growth.

This prediction comes at a time when the L.A. real estate market is creating affordability issues for many residents. So perhaps a “market correction” would be a good thing at this stage.

Here are the latest trends, predictions and forecasts for the Los Angeles, California housing market in 2017 through 2018.

Los Angeles Real Estate Predictions Through Summer 2018

In July, housing analysts at the real estate information company Zillow issued a forecast for the Los Angeles housing market that extends through the summer of 2018.

By their estimation, home values will rise by a more modest 2.0% over the next 12 months. That would be less than one fourth of the year-over-year gain that occurred over the previous 12 months, suggesting that a cooling trend is on the horizon.

The median home value in L.A. had reached $629,900 when this article was published in July 2017.

In July, the company published the following statement on its website: “Los Angeles home values have gone up 8.4% over the past year and Zillow predicts they will rise 2.0% within the next year.”

Again, this real estate market prediction was issued in July 2017, which means it extends into the summer of 2018.

Housing Affordability Issues Plague L.A.

One of the reasons home prices are predicted to slow down over the coming months has to do with affordability – or the lack thereof.

The Los Angeles housing market is one of the most unaffordable in the country, when you consider the median home price in relation to the median household income in the area.

In fact, a recent study from the UCLA Anderson School of Management ranked L.A. as the most unaffordable city in the nation for both home buyers and renters.

According to UCLA economist William Yu:

“Even given his stronger economic recovery, California still has relatively limited housing supply because of its stringent regulations. That is largely why we have less affordable housing markets here””

The Anderson School of Management report also issued a forecast for the Los Angeles housing market extending over the next few years. The group’s prediction said that home prices in the area would continue to rise for the next few years, as population growth surpasses the available supply of homes.

Tight Supply Fuels Competition among Home Buyers

Forecasts and predictions for the Los Angeles real estate market suggest that home prices will continue to rise for the foreseeable future. But those gains will likely be smaller than what we’ve seen over the last couple of years.

Supply is a driving factor in these predictions for continued price growth. The Los Angeles real estate market currently has a below-average level of homes available for buyers.

According to MLS data and other sources, Los Angeles had only about a 2.1-month supply of homes in June 2017. That’s a shortage. Real estate experts consider a “balanced” market to have around six months of supply. So the L.A. area is still very constrained, in terms of inventory.

This continues to put upward pressure on home prices, in addition to giving sellers an advantage at the real estate negotiating table.

Disclaimer: This article includes various forecasts and predictions for the Los Angeles real estate market extending into 2018. These projections were issued by third parties not associated with our company. We have compiled them here as an educational service to our readers. As a standard practice, HBI does not make any claims or assertions about future housing conditions.

Orange County Real Estate Forecast Suggests Smaller Gains in 2018

We are more than halfway through 2017, which means a lot of home buyers in Orange County, California are already looking ahead to 2018. And it begs the question: What will the real estate market be like in 2018? Which way are home prices moving? Will it be a buyers’ or sellers’ market?

Here’s a look at current trends in the area, along with an Orange County housing market forecast through the summer of 2018.

Home Prices Still Rising

According to MLS data and other sources, the median sales price for homes in the county rose above $675,000 in May 2017. Zillow clocked it at $682,800 in June, which was 4.4% higher than the same month last year.

But a recent forecast for the Orange County, California real estate market – extending through summer of 2018 – suggests that home prices might rise more slowly in the months ahead.

Read: First-time buyers struggle in California

Orange County, CA Housing Forecast: 2017 – 2018

The real estate research team at Zillow recently predicted that home prices in Orange County would only rise by around 1% over the next 12 months.

This forecast was published on June 2017, which means it extends into the summer of 2018. And it represents a significant reduction from the 4% to 5% appreciation that occurred over the last 12 months.

Here are the company’s home-price forecasts for the three largest cities in Orange County:

  • Anaheim: The housing analysts at Zillow expect home prices in Anaheim, California to rise by 1.4% over the next 12 months (as of July 1, 2017). House values in Anaheim rose by 6.5% over the previous 12 months.
  • Irvine: The company issued an even more modest forecast for the Irvine housing market, with an expectation for a 0.8% price increase over the next year.
  • Santa Ana: Economists predicted that home values in Santa Anna would rise by 2.1% between now and the summer of 2018. That was one of the highest forecasts they issued for cities within the broader Orange County real estate market. Santa Ana also had the highest increase in home prices over the last year, with values rising by 11% according to the company’s data.

The more moderate forecast for the Orange County housing market reflects those issued for many cities across the country. The general consensus appears to be that home prices nationwide are cooling down, even in the red-hot real estate markets where they rose by double digits over the last year.

In places like Orange County, houses are becoming unaffordable to an ever-growing segment of the population. This reduces demand and take some of the steam out of home-price appreciation. Perhaps that is why we are seeing more modest predictions and forecasts for the Orange County real estate market in 2018.

Is There a Price Bubble?

The Orange County real estate market is still constrained with limited supply available. According to local housing professionals, the county had about a 2-month supply of homes in May of this year. A “balanced” real estate market is considered to have about six months worth of supply. So from an inventory standpoint, Orange County is still a seller’s market due to limited supply.

But homes aren’t selling as quickly as you might imagine, given the limited inventory. In May, the median number of days on market for listed properties was 40. That means houses in the area are selling a bit faster than the national average, but they’re not going like “hotcakes.” This reinforces the idea that the local housing market is becoming unaffordable to the majority of buyers.

Which brings us to the million-dollar question. Is the Orange County real estate market in a bubble, or will it enter one in 2018?

Jim Doti, an economics professor at Chapman University recently told the Orange County Register that home prices in the area have reached an “irrational level.” This is because the median value is now eight times higher than the median family income. Doti went on to say: “We are in a balloon. No question.”

Disclaimer: This article includes predictions and forecasts for the Orange County housing market in 2017 through 2008. These projections were provided by third parties not associated with our company. As a rule, HBI does not make claims or assertions regarding future economic conditions.

Phoenix Housing Forecast Through Summer 2018: Getting Back to Normal?

Recent forecasts for the Phoenix housing market, extending into 2018, suggest that home-price appreciation could be slowing down. And this might actually be a good thing, given the tremendous volatility this market has seen over the last 10 years.

Real estate predictions for 2018 suggest that Phoenix could have a relatively normal year, at least where home values are concerned.

A Poster Child of the Housing Collapse

Phoenix, Arizona was one of the hardest hit cities in America during the housing collapse. This is partly the result of housing speculation and overbuilding. Thousands and thousands of homes were constructed during the heyday of the housing boom, many of which ended up vacant. We know the rest of that story.

But this market could finally be normalizing after a prolonged period of boom, bust and recovery. One recent forecast for the Phoenix housing market suggests that home prices will rise at a more modest, but historically average, pace of around 3.5% over the next year.

Home Price Forecast Through Summer 2018

House prices in the city rose by 9.5% over the previous 12 months, according to the company’s report. That’s much higher than the average annual appreciation for the U.S., going back 30 years or so. Those above-average gains were a response to the tremendous home-price appreciation that occurred after the housing crash.

In short, this market fell a long way after 2008, and then rebounded sharply with above-average annual returns for house values.

But home prices in the Phoenix housing market now appear to be rising more slowly. The economists at Zillow recently forecast that they would rise by a more modest 3.5% between now and the summer of 2018. That’s a more sustainable level of appreciation, compared to what we’ve seen over the last couple of years.

Related: Forecasts suggest normal price growth

In June, the median home value in Phoenix was around $268,000.

Phoenix Housing Market Still Below Peak Levels

Despite the significant price gains of 2016 and 2017, the Phoenix housing market is still well below the peak price level reached during the last housing boom. But that’s because prices were over-inflated at the time.

According to David Blitzer, managing director at S&P Dow Jones Indices, which publishes the long-running Case-Shiller home price index:

“It should be no surprise that it would take them a long time to get back there [to pre-recession peaks], if ever. There are things that don’t come back, or don’t come back in less than a generation.”

The bottom line here is that homeowners in the Phoenix area probably shouldn’t expect home values to return to those peak levels anytime soon.

Related: Should I buy now or in 2018?

Inventory Remains Tight, Fueling Competition

While the 2018 predictions and forecasts for the Phoenix real estate market suggest that prices are slowing, there is still a high level of competition among buyers. This is the result of limited inventory across the metro area.

The supply of homes available for sale in the Phoenix real estate market is currently falling short of demand. And even though there is quite a bit of construction happening right now, it probably won’t be enough to satisfy demand.

“We don’t really have enough new homebuilding going on to satisfy the population increase that we’re seeing,” said Phoenix-based real estate economist Michael Orr.

Given the current inventory situation, home buyers entering the Phoenix real estate market during the latter half of 2017, or in 2018, should be prepared for stiff competition. This is particularly true for choice properties located in desirable areas. The supply of homes in Phoenix is currently falling short of what’s considered to be a balance real estate market. This means home buyers are competing for limited inventory.

With these kinds of conditions, it’s best to enter the market with a solid game plan and pre-arranged financing. Cash buyers should have sufficient funds in the bank with statements to prove it. Home buyers using mortgage loans can benefit from being pre-approved by a lender, before entering the market. Sellers expect these things.

Disclaimer: This article includes predictions and forecasts for the Phoenix real estate markets through 2017 and into 2018. These forward-looking statements were provided by third parties not affiliated with our company. We have collected and presented them here as a service to our readers. As a general practice, HBI refrains from making predictions relating to the housing market or the broader economy.

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.