After five consecutive years of solid gains, home price growth in 2018 is likely to calm down measurably and rise by only 2% on a nationwide basis. Some states will actually experience a price decline, while others will still enjoy large gains.

Since 2012, the national median home price has risen by 38% while the constant quality measure of Case-Shiller index has advanced 36%. Over the same time, the median wage rate rose by only 12%. The improving economy, with consistent job gains, has raised housing demand while homebuilders have not adequately produced enough to fully satisfy the rising demand. Housing starts have been under the long-term historic average of 1.5 million a year for over a decade. In 2017, only 1.2 million new homes and apartment units were built, although this marks the best performance since the housing recession in 2008. Moreover, homeowners are staying put for much longer than usual before deciding to search for their next home. Our latest information from recent home sellers tells us they expect a 10-year tenure before listing the property, compared to the 7-year tenure that was the norm in past years. This mismatch between demand and supply has been the reason for strong home price gains in the past few years.

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