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In 2018, the challenge for the housing industry will be balancing bursting demand with a severe shortage of supply, according to realtor.com®’s State of the Housing Union, released in-step with the U.S. State of the Union this week. As with 2017, first-time buyers will have the hardest time, with little in their price point.

“The macro-factors that have defined real estate in recent years—strong demand and weak supply—continue to set the tone for the industry,” says Joseph Kirchner, senior economist for realtor.com.

The issues? Builders have been burdened by construction costs and lack of labor, and have concentrated on higher-priced homes.

“Builders will need to focus more on homes geared for moderate incomes, partner with the government on initiatives to transform distressed urban neighborhoods and overcome labor shortages through a combination of workforce development training and pressure to ease artificial restrictions on the supply of labor,” Kirchner says.

The dearth of inventory made prices rise, but sales struggle in 2017, according to data from realtor.com. Appreciation was at an average 5.8 percent, while pre-owned sales eked out a 1.1 percent gain. Comparing blue and red states:

R3-22836-StateofHousingUnion

A factor of significance: tax reform. In 2017, 2.5 percent of blue state mortgages were over $750,000—the limit on the mortgage interest deduction (MID) under the Tax Cuts and Jobs Act, which will apply to loans obtained on or after Dec. 15, 2017. Only 0.4 percent of red state mortgages were over the threshold.

“The new tax law that caps the mortgage interest deduction and the deductibility of state and local taxes can be expected to impact the upper-end market in 2018—precisely how and the extent of which remain to be seen,” says Kirchner.

Around the bill’s passage, realtor.com researchers surveyed Americans on their attitudes toward homeownership in light of reform. More than one-third were “concerned;” a considerable group of homebuyers and sellers reconsidered their plans.

For more information, please visit www.realtor.com.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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