Photo: Robert Clark
It wasn’t that US Millennials didn’t want to buy homes in 2017, but rather they had few affordable homes to choose from.
Despite the country’s home inventory crisis, prices cooled and sales fell last year, according to the newly released “State of the Housing Union” report released today by Realtor.com.
Low inventory thwarted many Millennial first-time homebuyers in 2017, with the majority of new inventory coming to the market falling into the mid and upper-tiers price points — and well out of their budget. Homebuilders will need to shift their focus on building more entry-level homes in 2018 to provide relief for would-be homebuyers left on the sidelines.
“This year is going to be tough for first time home buyers. The majority of first timers are looking for lower and middle price ranged homes and unfortunately, it’s these price ranges where the inventory shortage is most acute,” Realtor.com Senior Economist Joe Kirchner tells BuzzBuzzNews.
Inventory was (again) the single biggest factor affecting the housing market in 2017. National inventory fell 8.8 percent annually, and even a sharp uptick in housing starts couldn’t offset declining inventory levels. Housing starts were up 8.4 percent from last year.
“Builders have been focused on building expensive homes, while buyers face declining affordability and home price appreciation rising faster than wages. The supply of new homes is at the upper end, while demand is crowding the low to moderate price range,” Kirchner explains.
Meantime, over the last year, the pace of existing home sales slowed, rising 1.1 percent compared to 3.8 percent in 2016. Price growth held steady in 2017 at 5.8 percent, up slightly from 5.1 percent the previous year.
The “macro-factors” that have mostly defined the market in recent years, namely strong demand and limited supply, are likely to continue to set the market’s tone in 2018, and beyond, according to Kirchner.
Realtor.com categorized the economy as “upbeat” in 2017, with a boost in consumer confidence and the national unemployment level falling to its lowest level since 2000. Jobs were added to the economy for the 86th consecutive month in November 2017, another indicator that homebuyer demand is likely to remain strong in 2018.
“Jobs drive demand for homes. We expect continued economic growth to drive demand and push home prices higher,” Kirchner tells BuzzBuzzNews.
But, Kirchner is unsure what the impact of the new tax laws will be on the housing market in 2018, or how they might specifically impact first-time buyers. In the short-term, anyway, it might be beneficial to Millennial homebuyers.
“The increase of the standard deduction will help millennial home buyers in the short term by putting more monthly cash in their pockets, which could help them squeeze out some last minute savings for their down payment, renovations, or closing costs,” Kirchner tells BuzzBuzzNews.
However, post-buying, the benefits may disappear.
” Once they purchase the home, some of that will disappear because by taking the standard deduction, they forgo the opportunity to take the mortgage interest and other deductions. With the majority of first time home buyers looking for starter homes, the lowering of the mortgage interest cap to $750,00 is not likely to impact them unless they are buying a home at that price range,” Kirchner says.
Click here to read the entire release.