Taking stock in the year 2017:
Athletes trained and prepared for the PyeongChang 2018 Winter Olympics, the most recent Star Wars movie (The Last Jedi) was released, and United States housing prices went…up! With 2017 in the rearview mirror, it’s time to take stock of where home prices have been and where they may be headed in 2018.
According to realtor.com, the average United States home price rose by an estimated 5.5% in 2017. While the Midwest lagged behind the national number with an increase of only 3.2%, the Midwest number still fell firmly within last year’s predicted range of a 3-4% increase.
What about 2018?
Here is a look at a few of the leading contributors to your home’s value:
Housing value momentum. For the past three years national housing values have increased by 4% or more (source: Case Shiller Home Price Index). Many homes which were once valued under their initial purchase prices have now returned to or exceeded their earlier values. And the forecast for 2018 is once again a 3- 4% increase, allowing homeowners additional opportunities to take cash-out from their homes for renovation and other purposes.
Construction spending. What about new construction? According to a report published by Oldcastle Building Solutions, residential housing construction is expected to increase by 6% in 2018, with an anticipated increase of 5% in Illinois and 10% in Indiana.
Millennials. Millennial home-ownership rates continue to lag behind overall national home-ownership by almost 50%. In 2017, the overall homeownership rate was 63%, while millennial homeownership hovered in the 33 – 35% range. Millennial home ownership increased in the second quarter of 2017 by a full percentage point from 34.3% to 35.3%, representing an increase of 750,000 new buyers in the United States housing market.
And how are Millennials affecting new construction offerings? According to EC&M online, “Single-family and multi-family has been one of the biggest concentrations for new project development. A lack of housing supply and the potential for Millennials to break into the market should continue to drive new construction starts and large redevelopment projects.” Buying by Millennials will continue to be a focus in 2018 and relative to new construction, will drive some of the upcoming housing offerings. Look for an increase in low-priced suburban new construction projects in 2018.
Employment. Employment and job security are major drivers of home purchases. The national unemployment rate is 4.1% and remains at a 17 year low.
Which way now? Signs are pointing upward for housing values again in 2018, with most estimates projecting 3-4% growth. If your home began 2018 with a value of $300,000, you might expect a value of $309,000 to $312,000 at the end of 2018. Since any number of local factors may play a role in the change of your home’s value over time, it is important to remember that these are national projections.
I believe that 2018 will be a good year for buying and selling homes, and a safe year to pull equity from your home to add on or build as values are going up. Look for regular updates on this blog – I’ll continue to report on various economic factors that impact the housing market, offering you insights on how best to take advantage of opportunities to leverage your equity.
If you are aware of anyone who will need a mortgage for purchase or any type of refinance, please let me know or give them my contact information. I would welcome the opportunity to help anyone you know with their finance needs.
Kent Cochrum, Senior Loan Originator
(630) 330-1334 mobile
(630) 634-5136 office
CIBM Mortgage, a division of CIBM Bank, member FDIC
330 S. Naperville Road, Wheaton, IL 60187