You Might Need a Clairvoyant
Wondering how you might fare when searching for a new home in 2018? You might compare it to hitting a moving target. A lot of forces are at play when it comes to the real estate forecast for 2018. Moreover, the realization among experts that many of the projections for 2017 did not come to fruition lends to a cautious approach as they peer into the crystal ball for this year.
Financers and lending specialists such as Todd Lubar, president of TDL Global Ventures, LLC, are examining all the potential impacts on the market as trends and legislation continue to unfold. For Lubar and others who focus on making a dream come true for the underserved in the house-buying market, the influences of mortgage rates, availability, new federal tax laws, and price swings weigh heavily when steering buyers in the right direction, especially first-timers.
A Quick Look at Demand
Though the general consensus for 2017 predicted a slight rise in construction of new homes, this did not happen, according to an article in Forbes. Forecasters are therefore cautious about predicting the rate of new construction in 2018. In fact, a dearth in the real estate inventory during 2017 helped dictate the market in general. According to two major realtors in the U.S., Redfin and Zillow, inventory actually plunged in 2017.
The demand will depend upon how many decide to sell their current homes in 2018, how much the value of land rises for new construction, the availability of skilled workers, pricing of building materials, and density ordinances. Lubar says lenders must keep their fingers on the pulse of each variable in order to help new buyers enter the market.
Demand will also depend upon the ability of consumers to buy a home. The president’s recent signing of a law that reduces the amount of mortgage interest owners can write off, as well as changes to property tax deductions, fog the forecast as the effects of these recently signed laws remain unseen so early in 2018.
In the meantime, opinion generally appears to be brighter than in 2017. A rising percentage of homebuilders say they are expecting supply and home-buying conditions to improve at least slightly in 2018. A Market Watch website report says that six industry groups are projecting the rate of homes to rise at roughly a 2 percent lower rate than in the past two years. Essentially, the hike in prices will not cease but will slow, according to these economists.
Lubar, too, remains optimistic as new buying markets arise from a changing financial environment. New markets may bring new approaches from sellers, the type of innovations Lubar seeks for clientele demanding a more workable approach to buying a home.
The Skinny on Mortgage Rates
The feds hiked mortgage rates on short-term loans three times in 2017, but home loan rates only ticked up nominally. Most industry analysts see the mortgage rate climaxing somewhere between 4 and 5 percent in 2018—still low in historical terms. Still, many are not certain which impacts will drive lower rates, according to the Forbes article.
Will Renting Win Out in 2018?
Shortly after the housing crisis of 2008 and 2009, many gravitated to renting as a short-term solution to their housing situations, especially those who had mortgages being foreclosed on. Experts tend to believe that given the new tax laws, the affordability of a new home, especially upscale homes, will become more prohibitive in 2018. Because the new federal law also increases restrictions on state and local tax deductions, the ability of rising buyer markets—namely millennials—to buy the home of their desires will diminish in 2018.
If this happens, landlords, builders, and property owners in general will be deterring their efforts on the rental market rather than the buying market.
It’s Also About the Economy
Though home prices climbed in the previous two years, experts believe historically low interest rates, historically low unemployment, continuing rises in the stock market, and their corresponding benefit to 401Ks may counter any of the aforementioned negative effects on the ability of buyers to afford a new or existing home. Again, however, lies the caveat: These are all affected by whether a current homeowner is better off staying where he or she is at if the economy does not drastically improve, not to mention whether home developers see the economy ripe enough to increase their inventory.
Lubar Advocates Flexibility in 2018
Back to Lubar, whose nearly 20 years of experience in the home financing and loan industry provides keen insight on the prospects for 2018 – he maintains that buyers best be flexible in such a shifting environment.
For example, millennials may need to adjust their expectations on the type of house they buy and where, according to Lubar. He says the rocketing markets of a Seattle, San Francisco-Oakland-Hayward, Las Vegas, Long Island, Boulder, or Anaheim metro areas may not fit into a new buyer’s financial schematic. However, something nearby those areas or in flatter valuation zones, whose appeal is stability in prices and re-sales, might prove a prudent choice.
Whatever 2018 brings, Lubar insists that buyers should remain agile and flexible. In essence, the earth continues to move below our feet when it comes to the housing market and affordability of homes.