Real estate professionals hope for higher sales prices, continued low interest rates and an increase in housing inventory for 2018.
Last year, the predictions of higher interest rates and growth of new construction didn’t quite pan out as expected. Mortgage rates rose slightly, prices grew and inventory tightened while new construction picked up later in the year but only for the higher-end market.
After a year of seeing the unexpected, the crystal ball remains foggy for the 2018 residential real estate market.
The National Association of Realtors expects home sales to rise 3.7 percent in 2018. However, that prediction hinges on a number of moving parts, including interest rates, the new tax reform law and inventory.
On a state and local level, professional outlooks remain optimistic for 2018.
“I anticipate that residential properties will continue to sell at a brisk pace in 2018,” said Todd Umbenhauer, president of the Pennsylvania Association of Realtors. “This is both good and bad news.
“Inventory remains low in many marketplaces, so would-be purchasers do not have a lot to look at and must decide quickly if they inspect a home they like. Less inventory combined with still historically low interest rates puts upward pressure on home values.”
Umbenhauer also sees trends in the Greater Lehigh Valley, including a drop in the number of days homes sat on the market from 92 days in 2011 to 48 days in November 2017. He also noted a jump in median sales price from $166,000 to $185,000 over that time.
“As prices increase, it obviously impacts the type of home for which a buyer in the marketplace can qualify,” Umbenhauer said. “And the competition with other prospective purchasers can prove frustrating for individuals who do not prevail in a multiple-offer scenario, but if they stay at it, they will be successful.
“It is wise for them to do so as the interest rates we have enjoyed for a number of years are not likely to continue for years into the future.”
This year’s president of the Greater Lehigh Valley Realtors sees similar trends.
“[The year] is going to be a lot of the same that we saw locally here in the Lehigh Valley as it was in 2017: multiple offers, low amounts of inventory, a lot of buyer demand and just really not enough listings,” said Sean LaSalle, GLVR president and team leader at Berkshire Hathaway HomeSales/Fox and Roach Realtors, Macungie. “If we had to put a guesstimate to what we’ll see value do in 2018, it’ll probably increase between 3 and 5 percent.”
LaSalle attributes that growth in part to the large number of buyers in the market, low interest rates and the lack of lower-priced new construction.
“There’s just a lot less inventory,” he said. “People are staying in their homes longer than they have in the past. The millennial buyers are starting to come back into the market. We’ve seen not as much as we would like to see them. The reason why they are still staying out is probably because of student loans.”
‘PEOPLE ARE LENDING AGAIN’
Loans and lenders seem more accessible for those pursuing homeownership, a factor one Pocono professional believes will help to fuel the 2018 residential market.
“Credit scores are being cleaned up from the last 10 years,” said Spiros Bilianis, 2019 president-elect for the Pocono Mountains Association of Realtors and owner of Coldwell Banker Pennco Real Estate in Smithfield Township. “That’s why I like the market right now. People are lending again.
“Most of the people are finding money with 3½ percent down with financing, which is a great deal.”
Bilianis recently expanded his commercial business by opening a new brokerage in anticipation of a residential market upswing.
“Sales volume is up,” he said. “Median sales price is up. The number of units sold is up.
“The number of under contract is up, but new listings and actives are down, which means that we need to reassure people that they can get the price that they believe they want and the market will eventually creep up and cross those two lines.”
Bilianis said reassuring people about tax and other concerns may help to improve the lingering inventory challenges.
“Real estate taxes in our area need to be addressed,” he said. “If we can get this homestead [tax] exemption through, it’s a huge plus for everybody. … The existing homes are just a great value right now versus new construction.
“It’s a good market for existing homes, but residentially the market is good, and I do feel it’s going to be really, really good.”