Are you thinking about selling your home and moving up to
your dream home in 2018? Finally investing in rental properties? Or maybe
selling and downsizing?
You'll definitely want to read about these trends so you can
make well-informed decisions that put the most money in your pocket!
For the third year in a row now, we've combed the best
research by economists, analysts, and experts and summarized it for you with
these ten real estate market trends to watch in 2018.
In part one of this series, we covered our first six market
trends to watch in 2018, and here are the next four:
7. The GREAT news – the
real estate market is expected to cruise, not lose
Across the country, real estate analysts and financial
experts are generally in consensus with two predictions for the housing market
this year: it will slow down just a measure from its hot pace, and that's also
probably a necessary and healthy correction.
In fact, although historical data points to a turning of the
real estate cycle to that of contraction, not expansion, within the coming
years, our housing market is far different than the conditions circa 2007 that
precluded the crash and recession.
For instance, housing is still in short supply, especially
in the range of homes for first-time buyers and working-class families, which,
conversely, stimulates demand. Unlike the record-high homeownership rate we saw
in the mid-2000s thanks to the loosening of credit standards and widespread
availability of no-money-down and subprime loans, our banks are issuing a vast
majority of conservative 30-year fixed-rate loans these days.
Interest rates have climbed a tick but still remain
extremely low if you zoom out to a historical perspective, which incentivizes
home buying, too.
Rents are also rising in most metro areas around the
country, making home buying more attractive, and the changes we see from the
new tax bill aren’t expected to have such a significant effect to be a
detriment for the housing market.
Sure, home prices can’t keep climbing forever, but it looks
like we’ll have a “soft landing” in 2018, with moderate home price appreciation
in many areas – including Sacramento.
Markets are driven by tangible economic factors like jobs
(or unemployment), interest rates, growth, and supply and demand, and those are
all point to a gentle shift – not a screeching halt – in the housing market.
8. House tech fantasy finally becomes reality
Every year, real estate and home design blogs (like this
one!) optimistically predict that THIS is the year when we see a wave of
hi-tech innovations that transforms the common home. And while technology
marches on, it’s been adopted reluctantly and incrementally for the common
homeowner.
However, THIS is the year when we see a wave of hi-tech
innovations that transform the common home!
But this wave of home technology isn’t necessarily just
coming in consumer goods like appliances, televisions, built-in computer
systems, and electronics, but in construction practices, itself.
In fact, a lot of the advancements we'll see are born from
necessity, as builders look at new ways to fill the housing shortage with
prefab homes, 3D printed homes and construction materials, and automation that
makes beautiful and practical structures far more affordable as well as
practical.
But yeah, whole walls that turned into TVs and computer
screens would be nice, too!
9. Tax bill shakeup
No matter where you sit on the political spectrum, the
recent passing of a historic tax bill still poses more questions than it does
answers.
Will a rising economic tide “lift all boats” – including the
real estate market? Did saving (although capping) the Mortgage Interest
Deduction make it a non-factor for homeowners? Or, will the sting from new property
tax rules further slow homeownership rates? We’ll find out in 2018!
The good news is that under the new tax bill, that deduction
cap will be reduced, not eliminated. So new homebuyers will still be able to
deduct the amount of mortgage interest they pay on the initial $750,000 of
their mortgage loan. (Down from the current $1,000,000 cap on MID.)
(It’s worth noting that this only applies to new home
purchases going forward, but current homeowners will be “grandfathered in” with
the old rules.)
How much of an impact will this make? Most likely, it will
have only modest or negligible effect on homeownership and the cost of owning,
since the national median home price is only $254,000 (far below the $750,000).
Capital gains were also left intact, so when homeowners sell
their primary home (one they’ve lived in at least two of the past five years), they
can exclude $250,000 of profits from taxation, or $500,000 for married couples.
But under the new tax codes, homeowners will be able to
deduct only up to $10,000 in state and local income and property taxes OR sales
and state and local property taxes.
April 15 will be interesting this year – but owning real
estate is still one of the best investments you can make, no matter how you add
it up!
10. Inventory better, but
still lagging
We still don’t have enough houses for sale around the
country to serve demand, whether new construction or existing homes. In fact,
while more projects that were initiated in 2016 and 2017 are finished in 2018
and available for a resident, the inventory shortage still has a long way to
go. Somehow, rental prices are surging in most metro markets at that same time
as home prices because of this shortage, and that double-edged sword is
especially true in the Sacramento area.
Of course, no one could have anticipated the additional home
shortage caused by the myriad natural disasters we suffered through in 2017. In
some cities and states around the country, millions of homes were lost – for
both owners and renters – due to flooding, tornados, wildfires, and more.
But the need for housing also presents incredible
opportunities for landlords, investors, savvy homeowners, and even first-time
buyers who put in the time and work to find the right home this year.
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