WASHINGTON, DC—Existing-home sales and price growth in the single-family sector, including for-sale apartments, are expected to slow in the coming year, the National Association of Realtors said Wednesday. The forecast of a slowdown is due mainly to homeowners' diminished ability to claim deductions under the tax reform bill signed into law last week by President Trump.
By the numbers, NAR expects existing-home sales to finish 2017 at around 5.54 million, up 1.7% from the year prior. The national median existing-home price this year is expected to increase around 6% year over year. For 2018, though, the association expects a slight decline—0.4%—to 5.52 million, and Y-O-Y price growth to moderate to around 2%.
Even so, NAR's forecast calls for sunshine mixed in with the clouds. “The strengthening economy, and expectation that more Millennials will want to buy, serve as promising signs for solid homebuying demand next year, while also putting additional pressure on inventory levels and affordability,” says Lawrence Yun, the association's chief economist. “Sales do have room for growth in most areas, but nationally, overall activity could be slightly negative. Markets with high home prices and property taxes will likely feel some impact from the reduced tax benefits of owning a home.”
NAR's latest reports on home sales, along with the newly issued results from the S&P CoreLogic Case-Shiller Indices, show the residential market ending the year on an up note. Although November's pending-home sales index was up by just 0.2% from October, NAR reported last week that existing-home sales overall jumped 5.6% in November, while the monthly gain for existing condominium and co-op sales was even bigger at 14.3%.
Meanwhile, S&P Dow Jones Indices reported Wednesday that the US National Home Price NSA Index, covering all nine census divisions, reported a 6.2% annual gain in October, up from 6.1% in the previous month. The 10-City Composite annual increase came in at 6.0%, up from 5.7% the previous month, while the 20-City Composite posted a 6.4% Y-O-Y gain, up from 6.2% the previous month.
“The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” Yun says. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”
At S&P Dow Jones Indices, David M. Blitzer, managing director & chairman of the index committee, similarly strikes a cautious note in looking ahead—albeit one with favorable implications for multifamily. “Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth,” he says. “Some of these favorable factors may shift in '18.”
Blitzer notes that the Federal Reserve is widely expected to increase the federal funds rate three more times to reach 2% by the end of next year. “Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential homebuyers compelled to look at renting. Data published by the Urban Institute suggest that in some West Coast cities with rapidly rising home prices, renting is more attractive than buying.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
