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Economic Forecasts

Momentum Builds in Housing Market

Kiplinger's latest forecast on housing starts and home sales

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GDP 3.0% pace in '18, up from 2.3% in '17 More »
Jobs Unemployment rate down to 3.8% by end '18 More »
Interest rates 10-year T-notes at 3.3% by end '18 More »
Inflation 2.6% in '18, up from 2.1% in '17 More »
Business spending Up 7% in '18, boosted by expanded tax breaks More »
Energy Crude trading from $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.6%, new-home sales up 9.8% in '18 More »
Retail sales Growing 4.6% in '18 (excluding gas) More »
Trade deficit Widening 5%-6% in '18 More »

The housing market strengthened last year, indicating that the recovery will be on solid footing in 2018.

Residential construction improved in 2017. Total housing starts fell 8.2% in December to a seasonally adjusted annual rate of 1.192 million. December’s pullback was all in new single-family construction, which tumbled 11.8%. With December’s data now available, we have our first look at 2017 as a whole. Total starts rose 2.4% to a 1.202 million-unit pace. Single-family starts rose 8.5% last year, climbing steadily since bottoming out in 2011. Multifamily construction kept falling, down 9.8% in 2017.

New-home sales ended 2017 in solid territory and should be stronger still this year. They were down in December, falling 9.3% from November. But overall, the number of new homes sold in 2017 was 8.3% above 2016, a solid year-over-year gain.

See Also: A Housing Shortage Looms as Builders Can't Keep Up

Slightly more existing homes should sell in 2018 as inventory struggles to keep up with demand. Existing-home sales fell 3.6% in December to a seasonally adjusted rate of 5.78 million. Stock was down 10.3%, marking the 31st consecutive month of decline. It would take just 3.2 months — a record low — at today’s sales pace to sell all the homes on the market. Existing-home sales were up slightly in 2017 from 2016, but limited supply slowed growth.

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Home prices picked up in November, continuing their steady ascent. The S&P CoreLogic Case-Shiller National Home Price Index rose 6.2% in November from a year ago, after a similar gain in October. Greater demand than inventory is driving up home prices. Markets that are seeing the steepest increases are all on the West Coast.

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