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Zillow: Chinese Home Shoppers in the U.S. Can Expect More Newly-Built Homes for Sale in 2018

2017-12-20 11:00
-Zillow identifies Los Angeles, Boston, New York, San Jose, Seattle and Atlanta as the most popular U.S. housing markets for Chinese home shoppers

SEATTLE, Dec. 19, 2017 /PRNewswire/ -- Zillow®, the largest real estate website in the U.S., today published its 2018 predictions for the U.S. housing market -- offering specific insight on what Chinese home shoppers who are looking to buy in the United States can expect in the new year.

As of March 2017, Chinese nationals are the largest group of foreign buyers of U.S. real estate, spending $31.7 billion over the past year. To help these buyers navigate the U.S. real estate market, Zillow is the exclusive listing provider of U.S. for-sale real estate listings on Leju through a co-branded website, partners with NetEase to power their U.S. home search experience, and offers a WeChat channel to provide Chinese home shoppers with Chinese language content and market information.

Zillow's 2018 Housing Predictions for Chinese Home Shoppers:

More new homes to hit U.S. housing market
Chinese home shoppers in the United States tend to prefer relatively newly-built homes, but new home construction has been slow to recover from the American housing bust a decade ago. That will begin to change next year: New home construction in the U.S. is expected to increase in 2018. For the past five years, American homebuilders have focused on the luxury market, but will likely start building more entry-level homes as well. Zillow forecasts that new home building will rise 10 percent by the end of next year, totaling 633,000 new homes at a seasonally adjusted rate.

Inventory shortages will not ease, driving prices up further
In 2017, inventory was extremely tight in the U.S. housing market with the number of for-sale homes on the market falling steadily since 2011. In late 2017, there were 12 percent fewer homes for sale than a year earlier. This has been driven by the combination of strong demand -- particularly among young Americans -- slow new home building, and fewer homeowners deciding to sell. New construction of residential homes has steadily increased but not at a pace that will bring dramatic relief to the current inventory crunch.

U.S. home values to increase, outpacing income growth
Zillow forecasts that U.S. home values nationally will increase 6 percent over 2018. This would mean U.S. home values are appreciating at a rate that's more than twice as fast as U.S. wage growth. That, in combination with rising interest rates, should contribute to deteriorating affordability in 2018. At a regional level, home values in popular U.S. housing markets for Chinese home shoppers are likewise expected to increase, but at much higher rate -- rising 5.9 percent in Silicon Valley (San Jose) and 3.3 percent in Boston.

U.S. interest rates expected to gradually rise over 2018
Federal Reserve Chair nominee Jerome Powell is likely to advocate a continuation of current monetary policies, likely voting to steadily increase interest rates over the next year. The benchmark Federal Funds Rate -- the short-term interest rate targeted by the central bank of the United States -- is currently in the 1 percent to 1.25 percent range. By the end of 2018, Zillow expects it will be in the 2 percent to 2.25 percent range, about 100 basis points higher. The standard 30-year fixed mortgage rate is currently about 3.7 percent and will likely hit 4.5 percent at the end of 2018, which is still very low by historic standards.

Top U.S. Markets for Chinese Home Shoppers
Zillow identified 10 U.S. housing markets that will likely appeal most to Chinese home shoppers in 2018. The list was based on five key metrics: job growth over the past year, the number of highly-ranked nearby universities, changes in college rankings over the previous year, the share of Chinese and Chinese-American population, and data on markets that are rising and falling in popularity for Chinese home shoppers on Zillow. The list includes several markets that have long been popular with Chinese home shoppers in the United States -- such as Los Angeles, Boston, New York, San Jose and Seattle -- but also several emerging destinations such as Atlanta, Sacramento and Pittsburgh.

Rank

U.S. Housing Market

Zillow Home Value Index (ZHVI), October 2017

Forecasted Y-o-Y Growth, Zillow Home Value Index (ZHVI),

October 2018

1

Los Angeles, CA

$615,800

1.1%

2

Boston, MA

$432,300

3.3%

3

New York, NY

$426,100

2.3%

4

San Jose, CA

$1,076,400

5.9%

5

Seattle, WA

$457,700

4.9%

6

Atlanta, GA

$182,200

3.3%

7

Sacramento, CA

$376,900

4.9%

8

Pittsburgh, PA

$137,100

2.3%

9

Riverside, CA

$335,200

5.0%

10

Baltimore, MD

$262,000

2.1%

Statement from Zillow Senior Economist Aaron Terrazas

"The American housing market enters 2018 in a stronger position than at any point of the past decade. A strengthening labor market has pushed many renters into homeownership and the homeownership rate has begun to inch higher. However, supply has not kept pace with demand, and new home building in particular has lagged, pushing prices steadily higher. New home building should increase in 2018, but inventory is likely to remain tight overall."

"For Chinese home shoppers in the United States, who have traditionally gravitated toward pricey coastal markets -- namely Los Angeles, San Francisco, San Jose, Boston, New York and Seattle -- there is likely to be less competition for higher-end homes but more competition for lower-end homes as U.S. shoppers face a squeeze from rising interest rates. But Chinese home shoppers are increasingly looking beyond these historic gateways to inland markets like Atlanta, Sacramento, Pittsburgh and Riverside. These more affordable markets are also experiencing strong job growth and are home to top-tier educational institutions, both of which are key attractions for Chinese shoppers looking to buy in the United States."

Zillow 
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc. 

Source: Zillow

Related stocks: NASDAQ-NMS:Z NASDAQ-NMS:ZG

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