2017 home sales in greater Lansing finished slightly ahead of 2016 and was the highest in over ten years. The average selling price was up nearly 6% from 2016 and was the highest in ten years by a wide margin. So, what can we expect for 2018?
Here's What the 2018 Real Estate Market will Bring
Homeownership Will Remain a Common Goal
Consumer sentiment is strong. According to National Association of Realtors research, all demographic groups agree that buying a home is a good financial decision and homeownership remains a significant part of the American Dream.
Mid-Michigan's Economy Will Continue to Grow
The local economy is strong. Lansing metro job growth has exceeded 5000 the past two years and has been positive since 2011. The unemployment rate in Lansing has dropped consistently to about 4% which is generally considered full employment. Lansing has a very balanced economy and major employers are flourishing.
Mortgage Rates Will Rise Slightly
Mortgage rates are expected to rise slowly but remain at historically low levels. Current lending standards offer a wide range of financing for credit worthy borrowers with down payments substantially below the 20% thought by many to be a requirement.
Home Sales Will Continue to Slowly Rise
Despite a good economy and readily available financing, home sales have risen relatively slowly. Part of the problem is the supply of saleable homes. At the end of 2017 the absorption rate in greater Lansing was 2.1 months. That means it would take slightly over two months for all the available inventory here to be sold at the current rate of sales. This is the lowest in memory and far below the 6% that is considered to be a balanced market where neither buyers or sellers have an advantage. This is definitely a seller’s market. New home construction is not keeping up with demand as well.
Fewer First-Time Home Buyers are Expected
We are also facing a situation where fewer first-time buyers are able to move into home ownership. Even though most renters, both Millennials and Gen Xers, want and expect to own a home sometime in the future, saving for a down payment is increasingly difficult and the perception that a 20% down payment is required is keeping some from even exploring ownership.
Mid-Michigan Won't Feel the Impact of Tax Reform
The new tax reform law will weigh on housing in several high-priced markets on both coasts but we do not anticipate a significant depressant here where average selling prices make the market affordable and should not trigger deduction limitations on interest or state and local income tax caps.
So, what does this mean for home sales in 2018?
There should be no change in the economic outlook even as we expect modestly higher interest rates. Prices will continue to rise due to tight inventory and solid demand for homes. There will be no real relief for the inventory shortage and new home building will be up but there is a big shortage to overcome. It will be a seller’s market as buyer demand remains high and inventory remains low. Though consumers remain optimistic, hurdles for first time buyers remain.
It should be a solid but not record-breaking year barring a large influx of listings. Consulting with a professional Realtor to discuss your housing needs and how you can take advantage of the market may make the best sense.