The current lack of properties for sale will remain a top concern in the United States in 2018, playing a significant role in rising home prices, according to a new analysis.
It mean that home owners are likely to stay put rather than move unless they have to and first time buyers will continue to find it hard to get on the housing ladder, says the research from real estate firm Zillow.
It points out that inventory has been falling since 2011 and there are 12% fewer homes for sale than there were a year ago while there is limited space on city centre for new homes to be built.
The firm reckons that new homes will be built in the suburbs and geared towards millennials and older adults and this will be particularly difficult for first time buyers who don’t have the capital from a previous home sale to help with the down payment, especially in hot markets like Seattle and San Jose.
It also predicts that current home owners, wary of becoming buyers in such a limited market, will choose to remodel their homes instead of moving, worsening the inventory crisis.
Livable design features that appeal to both millennials and baby boomers will be a focus in new construction. Homes will be designed to make living simple and comfortable, for example, with wide hallways that can accommodate both strollers and wheelchairs.
Zillow believes that while builders will respond to the demand created by more first time buyers entering the market and increase new construction of entry level homes supply will still be hit.
The suburbs will expand as the cost of land and construction reaches a tipping point in urban areas. Urban living is popular among those looking for close access to jobs and cultural amenities, but building costs and regulations will lead to increased development in the suburbs.
Home prices will grow 4.1% in 2018, according to more than 100 housing experts and economists surveyed in the latest Zillow home price expectations survey, slightly less that the current 6.9% recorded annually.
‘We’re on the other side of the housing recovery, and the real estate market looks quite different than it did 15 or even five years ago. We have a huge generation entering the market. They really want to be homeowners, and they’re faced with an inventory crisis that leaves them with few options,’ said Zillow chief economist Svenja Gudell.
‘Builders won’t ignore this hungry market, and we’ll start to see a rise in new construction at the more affordable end, instead of all the luxury buildings we’ve seen lately. However, builders are also facing high costs, so instead of adding density in cities where zoning laws and land costs often preclude affordable building, we’ll see the suburbs grow and expand outward,’ she explained.
‘In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat. Home owners who are looking for a change will turn to remodelling and redecorating instead of selling their home and facing the challenges of being a buyer in a sellers’ market,’ she pointed out.
‘New homes will be designed to be particularly appealing to the millennial and boomer generations. Wide hallways can make it easier to move in, as well as make it easier to navigate a stroller or wheelchair through the halls. Large drawers will replace cabinets, making it easier to access everyday items that previously were hard to reach,’ she added.
