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11 Things to Know About the 2018 Housing Market

Arch Mortgage Insurance Company released its Housing and Mortgage Market Review for the winter of 2018, and chief among its findings is “it’s premature to worry about a housing bubble.”

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Home Prices Will Increase

Arch Mortgage anticipates that home prices should rise by 2 to 6 percent each year because of strong demand and smaller supply.

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Lower End of Housing Might Benefit While Higher End Hurt

With changes to the standard deduction, the mortgage interest deduction no longer serves as a big factor since fewer people will itemize their taxes. Lower taxes for those who don’t itemize could stimulate demand in lower-cost markets, the report said. At the higher end, prices could grow but at a slower rate. However, there are some areas where price declines could take place because price growth and population growth are already weak, the report said.

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Housing Will Become Less Affordable

The HaMMR predicts that affordability will be hurt because of rising interest rates and home prices. It urges those potential first-time homebuyers to enter the market sooner rather than later.

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Your Loan Approval Numbers and Down Payment OptionsBrian A Jackson/Shutterstock

Mortgage Rates Will Increase

The Fed is already saying it will have to raise interest rates three to four times in 2018 and 2019 after it raised rates in December.

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People Will Stay Put

With rising rates people aren’t going to want to move to a new place because their rates will likely be better. This in turn means they’ll likely look to renovate properties.

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Expect Urban Areas to Get Denser

Arch expects more people to flock to urban areas based on several factors. The HaMMR report cites a decline in young people getting driver’s licenses and co-living trends expanding.

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Policy Changes Will Stimulate Demand More Than Supply

The HaMMR predicts that tight lending guidelines will loosen a bit and increase demand. But help on the supply side will be limited.

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Purchase Originations Will Grow

The HaMMR expects purchase originations to increase 10 to 15 percent each year as wage growth starts to pick up. The Mortgage Bankers Association predicts a $1.2 trillion increase in purchase originations for 2018 alone.

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Construction on the Way

Arch said in the HaMMR that single family home construction will grow between 5 to 10 percent a year. With such a housing shortage, construction is anticipated to grow for several years.

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Variation in Home Prices

The HaMMR suggests that the desirable areas near downtowns or those with natural scenery will see the biggest price growth.

Make sure you thoroughly scout the neighborhood before buying a home. Check the neighborhood crime rates and meet the neighbors.

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Construction Costs Rising

Builders are facing a tough time to find workers, which is making construction take longer. Some builders claim that new regulations are shooting up the prices of homes. The National Association of Home Builders reported that from 2011 to 2016 the price of a home increased around $65,000 to $85,000 because of regulatory costs.

It’s that and a short supply of houses that have driven up home prices 40 percent in the last five years, according to Lawrence Yun, chief economist of the National Association of Realtors.

Make sure to get that home inspection when looking for a home, you’ll want to avoid the sight of any horror scenes like these.