How did the real estate market do in 2017, and what can you expect from the 2018 market?

Let’s take a look at supply, demand, and appreciation.

Economics 101 dictates that price is simply a function of supply and demand. If we look at supply in 2017, there were basically no homes available for sale. There was limited supply under $500,000, but under the $200,000 market, housing inventory basically did not exist.

At the start of 2018, we already had a 12% dip in supply. Buyers need to be prepared because it will be very difficult to find a home in 2018. In fact, it may be even more difficult than it was last year.

Demand was very stable in 2017, and I expect that will continue in 2018.

Loan limits have been increased on FHA and conventional loans, which does give buyers some more power as far as the amount of money they can qualify for. Those new loan limits could increase demand in 2018. However, since supply is very low, prices will likely go up, again making it difficult for buyers to find homes. 

Finally, let’s take a look at appreciation.

In 2017, appreciation peaked at 8.6% in July. Appreciation then declined throughout the third quarter and bottomed out at 3.6% in November. However, appreciation has risen to 7.5% through the end of December and the beginning of January, which is very unusual.

We should see continued appreciation in 2018 at all market levels. However, it’s important to understand that every market is different.

Right now, the greatest appreciation is under the $200,000, due to a lack of construction in that price point. In the $200,000 to $250,000 range, there has been a slight increase in construction to accommodate the increase in demand. This price point is definitely in a high seller’s market.

The $500,000 to $1 million price point is in a fairly balanced market, which makes it a good option for homebuyers if you can afford it. You will have more homes to choose from and some room to negotiate in that market.

The market over $1 million has seen a 10% increase in contracts in the fourth quarter, so it will be interesting to see how that pans out. Right now, that price point is in a buyer’s market, as supply is a little higher than current demand.

As I said, all markets are different. If you have any questions about your home or a specific neighborhood or price point, just give me a call or send me an email. I would be happy to help you.