Housing experts are increasing their expectations for home price appreciation as rising prices show no signs of slowing.
Experts expect home prices to climb 4.1% in 2018, according to the 2017 Q4 Zillow Home Price Expectations Suervey, an increase in their expectations for 2018. One year ago, experts predicted home prices would grow 3% in 2018.
The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 housing experts, market strategists, and economists about their expectations for the U.S. housing market in 2018 and beyond.
According to Zillow, the number of homes for sale has fallen on an annual basis for the past 33 straight months. Although building activity picked up slightly toward the end of the year, the biggest surprise of the 2017 housing market was the slow pace of single-family home building, according to the panelists. Only 16.7% expect it to change in 2018, a sign that limited inventory will still be a driving force in the housing market next year.
Experts believe 2017's low mortgage rates are likely to rise next year to around 4.5% from the current rate of about 3.9%. The average 30-year fixed mortgage rate has hovered around historical lows for years, and is well below the 6% rates seen during the run up to the housing bubble.
"The American labor market is stronger than it's been in decades and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes," said Zillow senior economist Aaron Terrazas. "Home building has not kept pace with this surge in demand and remains well below historical norms. We don't expect that these demand-supply imbalances will fundamentally shift in 2018: Demand will continue to grow and, though supply should increase somewhat, we still won't build enough new homes to meet this demand, contributing to higher prices. Higher mortgage rates will eat into buyers' budgets, putting even more price pressure on the most affordable homes for sale. Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market."