2018 Market Outlook
By: Tom Hosack, Northwood Realty Services President and CEO
Looking back, 2017 was a pretty steady year for real estate in western Pennsylvania and eastern Ohio. With sales units rising 2% and sales volume rising 5%, the average home sold increased in value last year in western Pennsylvania. In northeastern Ohio, sales units stayed the same as the year before, but volume was up 7% showing a solid increase in average sale price.
Had there been more inventory available; the year would have been stronger. A lack of “move up” homes prevented many people with starter homes from being able to upgrade. A lot of this was caused by the lack of affordable new construction. With the increased cost of building lots and labor, the discrepancy between the prices of an existing home to a new home is at a high.
Another trend that emerged last year was more activity spilling into regions and neighborhoods that have not experienced such a sustained real estate market in the past. Because of this, many people to not be able to afford to live in the area or neighborhood they grew up in and instead were forced to consider other slower moving neighborhoods with more inventory. This was seen in many of the urban and city markets, as well as, in Beaver and Westmoreland counties.
While not always a welcomed change, this is actually helping to stabilize the housing market in our region. In many areas of the country that do not have access to such inventory, housing prices are being driven to the point of being unaffordable.
Looking ahead to the market in 2018, we anticipate a fairly solid year with around a 4% growth in units and a 3% price appreciation for the average homeowner in our area. The driving force behind this will be the considerable success of our local markets in growing employment and wages. Homes in our area are very affordable compared to the national average.
We don’t foresee much issue with the new tax bill which limits the deduction of local, state, and property taxes. In some parts of the country where there are very high property taxes, it could be, but that is not what we will experience in our area. We also believe that the new tax bill will help drive the economy and generate more jobs and wage growth which has a direct impact on housing. The housing market always does better in an expanding economy!
The other big driver that will impact the housing market in our region will be the growth of small and mid-sized home builders. After nearly being driven out of business after the Great Recession, we are now starting to see them make a rebound. Many builders are buying smaller parcels and dividing them into a few lots which allow them to start building houses at much more affordable prices. This will help free up some of those “move up” houses that are in such demand.