Trends and predictions from Dr. Lawrence Yun, Chief Economist for National Association of Realtors
BOULDER – Each year, Realtors attending the National Association of Realtors (NAR) Conference have the privilege of learning about the most current real estate research and analysis to help their clients make informed decisions. A highlight at this year’s conference in Boston was NAR Chief Economist and Senior VP of Research Dr. Lawrence Yun’s annual report presentation and predictions for the year ahead.
Dr. Yun reported that nationwide in 2017, we saw the highest number of home sales in a decade. Sales for existing homes and new homes totaled 6.1 million. He called his prediction for the future slightly “boring” with home sales for 2018 predicted to be 6 million homes, increasing to 6.1 million in 2019 and 6.3 million in 2020.
According to Dr. Yun, homeownership is still one of the best wealth creators in America. In the last real estate boom, as prices rose so did the level of mortgage debt. In the boom since 2012, wealth has been created at a much more rapid rate due to lower mortgage debt and the absence of the subprime and greater- than-100-percent financing.
In 2018, we are still seeing rising prices in 90% of metro markets. In most cases, lower price ranges have had stronger price gains, but not as much in the upper price ranges. Notably different have been higher price gains near downtown areas as opposed to suburban areas.
The most common question Dr. Yun says he is asked is, “Are we in another real estate bubble?” According to Dr. Yun, “conditions today are very different than the last boom/bust cycle. In 2004, we had a huge oversupply of new homes. In 2018, we have a huge undersupply of new homes. In fact, we haven’t been building enough new homes to keep up with demand for over a decade. During the last downturn, there was the subprime factor and the variable interest rate. Now there is virtually no subprime and only 10 % variable rate mortgages instead of 30%. As a nation, we have about a 4.5-month supply of homes. That still places us on the seller’s side of the market.”
“The most recent survey of home buyers and sellers shows that most homeowners think it is still a good time to be a seller. Consequently, we are seeing a slight rise in inventory. Home prices are still outpacing rents, so it continues to be more attractive to be a homeowner for growing long-term wealth. Home prices are rising at one percent or two percent above the consumer price index, which has proven to be a healthy rate in the past.”
“As interest rates rise, homebuyers will lose some purchasing power. I don’t see home prices rising as fast as they have been for the past few years. My prediction for home prices nationwide is 4.7% for 2018, 3.1% for 2019, and 2.7% for 2020.”
These trends and predictions are fascinating and provide a backdrop to the conversations about our real estate market.
Keep in mind that all real estate is local, right down to the street. National statistics are very general trends. Be sure to consult your local Realtor for the most up-to-date information for your neighborhood.
By Duane Duggan, RE/MAX of Boulder. Duane is an award-winning Realtor and author of the book, “Realtor for Life”. He has been a Realtor for RE/MAX of Boulder since 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail Duane at DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.