U.S. home prices are predicted to grow at a slower pace in 2018 as inventory constraints begin to ease, according to a report Wednesday by realtor.com.
Next year, the annual price growth will likely drop to 3.2% from the forecasted 5.5% for 2017. Most of the slowing will be felt by the luxury segment, where oversupply has been met with a limited pool of buyers, according to the 2018 National Housing Forecast by realtor.com.
"Inventory increases will be felt in higher priced segments after spring home buying season, which we expect to take hold and begin to provide relief for buyers and drive sales growth in 2019 and beyond," said Javier Vivas, director of economic research for realtor.com, in a statement.
The report didn’t separately break down the forecasts for luxury prices and sales.
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As for the general market, existing home sales are expected to rise 2.5%, while new home sales are likely to see a 7% increase in 2018.
By early next fall, housing inventory is projected to register positive year-over-year growth for the first time since 2015, based on the current deceleration rate of inventory declines, according to realtor.com, which, like Mansion Global, is part of News Corp.
"Next year will set the stage for a significant inflection point in the housing shortage," Mr. Vivas wrote in the report.
The wildcard in 2018 will be the impact of tax reform legislation. While the ultimate impact of the U.S. government’s tax reform will depend on the details, both House and Senate bills include provisions that are likely to reduce tax benefits for homeowners, according to the report.