In 2017, the number of sales of existing homes (which have previously been lived in) is expected to rise about 3.5 percent, to 5.64 million, according to the midyear forecast from the National Association of Realtors. The group predicts that existing-home purchases will rise an additional 2.8 percent in 2018, to 5.8 million.
“The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home,” says NAR Chief Economist Lawrence Yun. “However, prices are still rising too fast in many areas and are outpacing incomes.”
Sales of brand-new homes, which builders can’t seem to put up fast enough, are expected to jump 10.7 percent, from 560,000 in 2016 to 620,000 this year, according to NAR. They’re expected to rise an additional 8 percent in 2018, to 670,000 sales.
New homes typically are more expensive than existing homes, as builders must contend with shortages of land and labor, plus rising costs of materials and difficulty obtaining financing.
The price tags of all homes are expected to keep rising. NAR predicts prices will jump 5 percent in 2017 and an additional 3.5 percent in 2018.
“As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities,” says Senior Economist Joseph Kirchner of realtor.com. “Meanwhile, builders are mostly building for the mid- to upper-price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes.”
In some white-hot markets along the coasts, prices are rising by double digits because of the dearth of homes. That’s led many current homeowners who might be interested in trading up to a larger, nicer home in their area to hold off—because those homes are simply out of their price range.
Buyers are coping by putting ever-higher percentages of their incomes toward homeownership—even when it means eating at home every night and doing without new clothes or annual beach vacations. Sometimes they’re spending half of their take-home pay on housing.
Others are purchasing homes farther from the city center where they work, settling for smaller homes or even purchasing residences in need of some work.