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No respite for low inventory crisis in 2018, Zillow warns

By Mike Wheatley | November 21, 2017

Those hoping for relief from the ongoing inventory crisis won't find it in 2018. At least, not if you believe Zillow's latest forecast of what's in store for real estate over the next 12 months.

The online real estate giant made a number of forecasts for next year. Among some of the top trends it highlighted, it said one of the main ones would see current homeowners look to remodel their homes rather than sell, further limiting inventory, and with limited space to add new homes in city centers, suburban sprawl will also make a return. Newly built homes will be designed with both millennials and aging adults in mind, as both generations are looking for similar features.

Zillow's 2018 Housing Predictions:

1. Inventory shortages will continue to impact the housing market: The lack of homes for sale will remain a top concern in 2018, playing a significant role in rising home prices. Inventory has been falling since 2011, and there are 12 percent fewer homes for sale than there were a year agoi. This will be particularly difficult for first-time homebuyers who don't have the capital from a previous home sale to help with the down payment, especially in hot markets like Seattle and San Jose.

"In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat," said Zillow's chief economist Dr. Svenja Gudell.

2. Homeowners will choose to remodel instead of sell: Today's homeowners, wary of becoming buyers in such a limited market, will choose to remodel their homes instead of moving, worsening the inventory crisis.

3. Baby Boomers and millennials will drive home design: Livable design features that appeal to both millennials and Baby Boomers will be a focus in new construction. Homes will be designed to make living simple and comfortable – for example, with wide hallways that can accommodate both strollers and wheelchairs.

4. More entry-level homes: Builders will respond to the demand created by more first-time buyers entering the market and increase new construction of entry-level homes.

5. Suburban sprawl will return: The suburbs will expand as the cost of land and construction reaches a tipping point in urban areas. Urban living is popular among those looking for close access to job centers and cultural amenities, but building costs and regulations will lead to increased development in the suburbs.

6. Home price growth will slow: Home prices will grow 4.1 percent, according to more than 100 housing experts and economists surveyed in the latest Zillow® Home Price Expectations Survey. Home values are currently growing at 6.9 percent annually.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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