Annual home price growth has been faster in 2018 than it was in 2017 in the United States and inventory has fallen on a year on year basis for 42 consecutive months.
These conditions have put sellers in the driver’s seat for the past few years, according to the latest residential property market analysis from real estate firm Zillow.
Recently, though, data suggest the balance may be starting to tilt back toward buyers. Home-value growth is slowing in more than half of the nation’s 35 largest metros, and price cuts are becoming more common.
The report, based on the predictions of real estate economists and experts, also says that even in those markets where appreciation has slowed, it remains above its historic average rate and sellers continue to have the upper hand, particularly at the most affordable price points.
Three out of four economists surveyed said the national housing market would not shift to a buyers market until 2020 or later while the largest share of respondents, some 43%, believe the national housing market will become a buyers’ market in 2020.
At a regional level, the panellists believe the Midwest will shift to a buyers’ market a year before the rest of the country. The most frequently selected year for the Midwest to start favouring buyers over sellers was 2019, while the other regions are expected to change in 2020 along with the nation overall.
‘For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,’ said Zillow senior economist Aaron Terrazas.
‘Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger. Inventory is still falling on an annual basis, and home values are growing well above their historic pace. Although these trends are starting to lose their edge, it is far too soon to call it a buyers’ market,’ he added.
Home prices across the country are expected to continue to see strong appreciation in 2018, with a predicted 5.9% increase. Although most panellists have made upward revisions to their home value growth projections from a year ago, the adjustments are focused on the near term, leaving the outlook beyond 2020 little changed.
‘While ongoing supply constraints are reinforcing the floor on home prices right now, the experts’ forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value appreciation in 2020 and beyond,’ said Terry Loebs of Pulsenomics.
He pointed out that another indicator from the latest survey is consistent with a shifting market. ‘For the first time, a majority of the experts said that there is downside risk to their long term outlook for home values nationally and they outnumber experts who assigned upside risk to their forecasts by more than a three to one ratio,’ he added.
