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23 June

How 2018 Will Bring Change to the Real Estate Market

With 2017 having been a year of an immense amount of unpredictability, 2018 holds the potential to bring many new changes to numerous markets – with housing being an extremely volatile area. While upcoming predictions are still to be determined, experts have been discussing several thoughts on what will be happening in the year to come.

PRICE GROWTH WILL SLOW – BUT NOT STOP

For the past couple of years, national home prices have been on the rise, with the hottest markets being large western cities. Continuing economic growth, discounted interest rates, and low unemployment are backing the heightened interest rates – but some of these factors are expected to change in 2018. While prices are expected to continue to grow in the new year, this will come with a reduced rate of increase.

IMPACT FROM NEW TAX BILL

President Trump’s new tax bill will create changes to the mortgage interest deduction and to property tax deductions. It will also impact how much money people will have and be willing to spend. Nevertheless, following the best year for wage growth since the recession, the underlying need for housing appears to remain strong. Millennials (who are more likely to own a home than prior generations of single individuals) combined with pent-up demand from renters (who have been waiting to own a home) are appearing to be the potential to fuel this demand.

Renting MAY BECOME MORE EFFICIENT THAN OWNING

Home prices are rising faster than the increasing rate of wages, salaries, and inflation. In some areas especially, buyers would benefit more from being renters than from the cost of a mortgage. This is increasingly true with the heightened student debt and a lowered supply of available properties.

INVENTORY WILL REMAIN A CHALLENGE

A key issue in the 2017 housing market was the lack of inventory that has ultimately led to a bidding war. Some of the factors creating obstacles for builders are the local regulations against density, lack of usable space, and the expensive cost of skilled labor, building materials, and land. Natural disasters have caused construction resources to be allocated to the areas that these tragedies struck. While this was necessary, it caused growth to flatline elsewhere. However, these current circumstances of lacking inventory are unsustainable, as prices cannot rise quicker than wages forever.

An increase IN RESIDENTIAL CONSTRUCTION IS NECESSARY

It has become clear that the usual cycle of demand and strong prices ensuring construction will not hold true. Job creation and the continually expanding economy should encourage rising home sales in 2018 by reviving affordability and inflating sales.

 

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