If you’ve been looking to buy a home over the past year in Boston, you have likely become familiar with mobbed open houses, bidding wars, cash transactions and homes that sell in a weekend – or even before the first open house. In truth, the Greater Boston market has been this competitive for a few years now. So will it continue to grow in 2018?
Inventory. According to Zillow: “Inventory shortages will drive the housing market: Inventory will remain a major concern in 2018, continuing to play a significant role in pushing up prices. It will create particularly strong headwinds for first-time home buyers, who don’t have the benefit of profits from a prior home sale to boost their down payments and make them more competitive.”
Thankfully, realtor.com® projects that in the U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015. They also predict that Boston will be one of the first major cities to see an increase in inventory next fall, especially in the higher price points.
Rates and Tax Reform could have some impact on buyers looking to jump into the market. Despite these challenges, Lawrence Yun, National Association of Realtors (NAR) Chief Economist, says 2018 is measuring up to be a better year than 2017: “An overwhelming majority of renters want to own a home in the future and believe it is part of their American dream,” he said. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.”
Mortgage Rates. Top economists at the Mortgage Bankers Association, predict mortgage rates will rise in the next few years, past 4% and even past 5% as we head into 2019. Lynn Fisher, vice president of research and economics for MBA, said that their forecast shows that house prices can’t continue to rise at this rate forever. MBA expects a stabilization in house prices, not a decrease, but a calming of the recent increases in the coming years.
Another facet of the housing ecosystem that is affected by rising housing prices is Affordability. With rising home values it’s becoming more and more difficult for buyers, particularly new buyers, to become homeowners in Boston. Such as neighborhoods like South Boston, Midtown and The Seaport have seen a jump in luxury housing and new construction. HSH just released it’s report on how much a buyer needs to make in order to purchase in major metropolitan cities. Key takeaways: Amid tight markets with little new supply, housing affordability continues to be a spreading problem. In Boston you’ll need to “make six figures if you want to buy a home:”
Using second-quarter 2017 data from the National Association of Realtors — and taking into account the principal, interest, tax, and insurance payments required — the site determined that it would require a salary of $98,518.71 to afford a house here.
The REALTORS® Confidence Index, a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners, showed that in October, 89% percent of respondents reported that home prices remained constant or rose in October 2017 compared to levels one year ago (85 percent in October 2016).
A very mild fall (weather wise), low interest rates and a slow trickle of inventory has pushed our fall market well into December. All signs point to a very busy few months ahead in the Boston market. For the buyers looking to jump into the housing market, now is the time to start the search.