Real Estate 2018: What to Expect
As we head into a new year, the most common question I get is, “What’s the outlook for real estate in 2018?”
It’s not just potential buyers and sellers who are curious; homeowners also want reassurance their home’s value is going up. The good news is that a strong U.S. economy, coupled with low unemployment rates, is expected to drive continued real estate growth in 2018. However, changes on the horizon could significantly impact you if you plan to buy, sell or refinance this year.
HOME VALUES WILL CONTINUE TO RISE
Get ready for another strong year! U.S. home values and sales volume will continue to rise in 2018.
Experts agree that home prices will increase in 2018, but predict a slower rate of appreciation than 2017, which clocked in at nearly 7 percent nationwide. National Association of Realtors (NAR) Chief Economist Lawrence Yun predicts a growth rate this year of 5.5 percent,1 while Freddie Mac’s September Outlook Report forecasts a rate of 4.9 percent. Either way, all indicators point towards continued growth in 2018.2
What does it mean for you? If you’re a current homeowner, congratulations! Real estate proves once again to be a solid investment over the long term. And if you’re considering selling this year, there’s never been a better time. Contact me at 856-912-6300 or email@example.com to request a free Comparative Market Analysis to find out how much you can expect your home to sell for under current market conditions.
If you’re in the market to buy this year, there’s good news for you, too. Although prices continue to rise, the rate of appreciation has slowed. Still, don’t wait any longer. Prices will continue to go up, so you’ll pay more six months from now than you would today. Contact me at 856-912-6300 or firstname.lastname@example.org to set up a free, no-obligation property search and get notified about listings that meet your criteria as soon as (or before) they hit the market.
MILLENNIALS WILL MOVE TO THE SUBURBS
Economists predict the suburbs will be where millennials and first-time buyers will flock for the greater variety of homes at affordable prices.6
Rising home prices, a sluggish job market, and an increase in student loan debt made homeownership largely unattainable for many millennials in past years. However, there’s significant evidence that this trend is turning around. For the fourth year a row, the National Association of Realtors’ 2017 Home Buyer and Seller Generational Trends survey found that millennials were the largest group of homebuyers.7
As millennials age, they are settling down and having families, which has prompted an increasing demand for larger but affordable homes. Thus, many are flocking to the suburbs, with 57 percent of millennial buyers opting for a suburban location.
What does it mean for you? If you’re a millennial who has been priced out of urban living, or is looking for more space for your growing family, a number of suburbs in our area have a lot to offer. We can point you towards the communities that will best meet your needs.
And if you’re a suburban homeowner with plans to sell, give me a call. I know how to market your home to millennials … and can help you sell quickly for top dollar by appealing to this growing market segment!
BOOMERANG BUYERS WILL RETURN TO THE MARKET
“Boomerang buyers” comprise the nearly 10 million Americans who lost their homes to foreclosure or short sales during the housing recession of 2006 to 2014.
According to MyFico.com, a foreclosure remains on a credit report for seven years. It takes many boomerang buyers at least that long to raise their credit score and save up enough cash to qualify for a new mortgage.8
With this “seven-year window” in mind, RealtyTrac predicts that the largest wave of boomerang buyers – more than 1.3 million – will be eligible to re-enter the housing market in 2018.9
Markets likely to see the highest influx of boomerang buyers are those that had a high percentage of foreclosures AND have remained affordable. The majority of boomerang buyers are middle-class Gen Xers or Baby Boomers. Expect to see even more competition for entry-level homes in those markets.
What does it mean for you? If you’re a boomerang buyer, I understand your unique circumstances. I can help you navigate the real estate process and write competitive offers that will play to your strengths. Contact me to discuss your options.
NEW TAX LEGISLATION WILL IMPACT HOMEOWNER DEDUCTIONS
The “Tax Cuts and Jobs Act” passed at the end of 2017 nearly doubles the standard deduction, so far fewer Americans are expected to itemize this year. For those who do, however, it could mean less homeowner deductions are available than in the past.
Previously, homeowners could deduct interest paid on the first $1 million of mortgage debt, but that threshold has been lowered to $750,000 for new mortgages. (Existing mortgages will not be impacted.)
Additionally, taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. The new legislation restricts this deduction to $10,000. It also eliminates the deduction for moving expenses (except for members of the Armed Forces) and interest on home equity loans unless the proceeds are used to substantially improve the residence.10
It’s yet to be seen how the tax bill will impact the real estate market overall. While some economists predict a price reduction in certain markets, Republican lawmakers project the bill will increase take-home pay and stimulate the economy overall. According to Realtor.com Senior Economist Joseph Kirchner, “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already.”11
What does it mean for you? If you’re an existing homeowner, be sure to consult a tax professional if you’re concerned about the impact the new tax bill could have on you.
And if you’re planning to buy or sell this year, I can help you determine how the tax bill could affect demand in your current or target neighborhood and price range.
INTEREST RATES WILL RISE
No one knows exactly what will happen with mortgage rates this year, but the Mortgage Bankers Association anticipates the Federal Reserve will raise rates three times in 2018, with Freddie Mac’s 30-year fixed rate mortgage reaching 4.8 percent by the end of Q4, up from around 4 percent at the end of 2017.12
Kiplinger.com Economist David Payne also predicts interests rates will rise this year, with short-term rates outpacing long-term rates as the Fed aims to curb inflation in a tightening job market. He predicts the bank prime rate that home equity loans are based on will increase from 4.25 percent to 5 percent by the end of 2018. 13
What does it mean for you? If you’re in the market to buy, act now. Rising interest rates will decrease your purchasing power, so act quickly before interest rates go up. Give me a call today to get your home search started.
And if you’re a current homeowner who is considering refinancing or a home equity loan, don’t wait. I can help you estimate your property’s fair market value so you’ll be prepared before contacting a lender.
|2018 ACTION PLAN
If you plan to BUY this year:
If you plan to SELL this year:
I’M HERE TO HELP
While national real estate numbers and predictions can provide a “big-picture” outlook for the year, real estate is local. And as a local market expert, I can guide you through the ins and outs of our market, and the local issues that are likely to drive home values in your particular neighborhood. If you have specific questions, or would like more information about where we see real estate headed in our area, please give me a call at 856-912-6300 or email me at email@example.com! I’d love to discuss how issues here at home are likely to impact your desire to buy or a sell a home this year.
- Inman News –
- Freddie Mac September Outlook Report –
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- National Association of Realtors Press Release –
- Fox Business News –
- Zillow Research –
- National Association of Realtors’ Home Buyer and Seller Generational Trends Report –
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- RealtyTrac –
- National Association of Realtors –
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- Mortgage Bankers Association Economic Forecast –
- Kiplinger Economic Forecast –