Housing markets across the U.S. will remain strong through the end of 2018, with a housing bubble not anticipated, according to the Fall 2017 edition of the The Housing and Mortgage Review?. The report, based on a statistical model that relies on recent housing market indicators, was released this week by the Arch Mortgage Insurance Company.
Some factors keeping the market strong include:

1. Low interest rates
2. Low inventory of homes for sale
3. Overall housing shortage
4. Tightening job market

Housing Prices to Remain High Next 2 Years

The report predicts that housing prices nationwide should remain high over the next 2 years. In fact, the probability that home prices will drop in the nation?s 401 largest cities averages just 4%, the report said.
However, some areas were more susceptible to price declines than others, such as energy-extraction regions which had the highest risk. Alaska topped the list with a 39% chance of a price decline over the next 2 years, followed by North Dakota, 33%; Wyoming, 31%; West Virginia, 26%; Oklahoma, 16%; Louisiana, 15%; New Mexico, 11%; Mississippi, 10%.
The risk for price reductions in the top 50 metros by population was about 33% over the next two years. The two metros with the highest risk at 35% were Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla., and Nashville-Davidson-Murfreesboro-Franklin, Tenn.

Home Prices in Nation Haven?t Peaked

Another interesting revelation in the report is that while home prices nationwide are up and still rising, they haven?t reached their pre-crisis peaks when factoring in inflation, and the fact that the dollar doesn?t buy as much today as it did 10 years ago.
When inflation is considered, home prices nationwide are actually 10% lower now than they were in 2007, rather than 6% higher as calculated using the Home Price Index (HPI), the report said.

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In its new ?Looking Ahead to 2018? report on the economy and housing, Freddie Mac predicts that the moderate economic growth that we?ve experienced this year, as well as job gains and low mortgage rates, will continue into next year.
If these conditions do continue as expected, Freddie Mac predicts three housing trends for the upcoming year. These include 1) purchase mortgage volume increases, 2) a reduction in rate refinance activity, and 3) more borrowers tapping into their home equity. Here are more details about these expected mortgage trends.

Purchase Mortgage Volume to Increase

Growth in home sales is expected to be driven by new homes sales, not by the sale of existing homes. New construction of single-family homes is expected to rise by approximately 2% next year. Meanwhile, existing homes sales will continue to be stifled by limited inventory and an aging population with declining mobility that is staying put.

Rate Refinance Activity to Drop

The report indicated there?s been a shift from a refinance-oriented market to a purchase-oriented market that will likely continue through 2018. In fact, it said that refinance loans will account for less than one-fourth of mortgage activity next year, the lowest this share of the market has been since 1990.
Slightly higher interest rates are one reason the market share will drop, as fewer homeowners are expected to refinance for the purpose of getting better rates.

More Homeowners to Take Advantage of Home Equity

More homeowners are expected to refinance or to take out second mortgages to pull cash out of their home equity. In fact, as long as home prices continue to rise, this activity should rise as well, Freddie Mac said. What will homeowners do with the cash? The report predicts they will invest in home improvements, consolidate existing debt, or pay student loans debt.

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Acuity National Real Estate Solutions is a national title agency offering cutting-edge tools to help lenders reduce costs, streamline closings and increase compliance. If you?re a lender who would like more information, please contact us today!