If current analyses are any indication, home prices in the land of Uncle Sam aren’t heading south anytime soon, this according to the Winter 2018 edition of The Housing and Mortgage Market Review (HaMMR), released by Arch Mortgage Insurance Company (Arch MI). Among the assessments, U.S. housing prices will keep climbing by 2 to 6 percent yearly, especially in the entry-level space.
“With interest rates and home prices both on the rise, first-time homebuyers—largely millennials—may want to consider making the jump from renting to owning sooner rather than later,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services, Arch Capital Services Inc. “Our research shows few signs of a housing bubble because the typical warning signs aren’t present. Overall, the shortage of housing paired with a robust job market should keep the housing market strong and growing, short of an unexpected event and despite the contrary pressures that may be created by the tax bill.”
Arch MI also debuted a new tool in this edition: the Estimated Fundamental Home Value Index (Fundamental HVI) spots housing bubbles by evaluating home prices across 50 states and 401 metros.
“The index suggests that the average probability of home price declines in America’s 401 largest cities remains unusually low, at 5 percent,” the report says. “This trend reflects broad-based favorable fundamentals, such as a tightening job market, relatively low interest rates, and a limited number of homes for sale.”
As for the new U.S. tax code, the report contends that the changes might bruise higher-cost, high-tax markets but benefit lower-cost ones. Limitations on the ability to deduct state, local, and property taxes will translate into bigger tax bills for many upper-middle-class members, the report continues. The upshot: “a permanent dampening effect in high-cost areas relative to the previous tax rules,” it notes.
New York, New Jersey, Connecticut, California, and Maryland are the hardest-hit states, the report says. Some areas could see price drops, with Connecticut and New Jersey most vulnerable due to anemic home-price and population growth. Generally speaking, prices in higher-cost places are still likely to increase due to economic growth, just at a reduced pace.
You can read the full report by clicking here.