Investors are also unlikely to unload the lucrative rental properties they've been holding. In fact, the institutional market of rental investors has consolidated recently and streamlined its management. Institutional investors, led by Blackstone's Invitation Homes, now own just more than 200,000 single-family rental properties, worth an estimated $33 billion, according to Amherst Capital. And that is growing.
"Institutional activity in the single-family market continues to increase, driven by relatively attractive valuations, modestly strong home price appreciation and stable financing," said Sandeep Bordia, head of research and analytics at Amherst Capital. "We believe that evolving demographics, financial factors and shifting consumer preferences, will keep demand for single-family homes elevated over the coming years."
As a result, millennials who might have been buyers are turning instead to single-family rentals, which are often in good neighborhoods with good schools. That's what large-scale investors targeted when they entered the market following the housing crash. So while it may seem, from the national picture, that home prices are not as overheated as they were in the past few years, the story is far different when you focus on where the demand lies.
"Income growth has been decent lately, but it has not kept pace with rising housing costs, giving renters in particular the feeling of trying to hit a moving target as they attempt to save a down payment for the jump into homeownership," Zillow's Gudell said.
"There's a lot happening just under the surface of this otherwise fairly predictable market, and not all of it bodes well as we look ahead into 2018."