One of the biggest drivers of the U.S. economy, the housing market, affects all Americans. Whether they own a mansion in high-priced places like San Francisco or a bungalow in a small Midwestern town, homeowners know that their home is their biggest investment. On Wall Street, the fate of stocks from banks to builders to all related industries hang in the balance. According to Brian O’Connell in an article for The Street, there are 5 key factors shaping up to make 2018 a banner year for real estate!
Interest rates are rising, but not by enough to spook buyers. As of March, 2018, the average 30-year fixed mortgage rate stands at 4%, still low by historic standards. At that rate, homes remain affordable, enticing more buyers into the market. All indications are that the Fed will take action to keep rates from rising by more than .5%.
Banks are also showing more appetite for mortgage lending. As they loosen standards and more actively pursue customers, the real estate market will sustain strong demand. Much of the real estate market depends on the availability of finance, and the banks are motivated to keep the loan pipelines flowing.
Home sales should also increase in high-tax states. The new tax plan encourages homeowners, especially owners of second properties, to sell homes in states like California and New York. In these areas, there may be some leveling out of prices, due to increased supply, but with homes in desirable areas becoming more affordable, demand should remain strong.
The new tax plan promises to put plenty of extra cash in the hands of affluent buyers. This bodes well for vacation properties. Those who can afford these properties will be looking for a way to invest their tax windfalls. Because vacation homes are usually cash purchases, the changes in the mortgage deductibility will have a negligible effect on this market segment.
Technological innovations are opening the door for more people to make real estate transactions without a real estate agent or with significantly reduced commissions. Opendoor.com, for example, helps people bypass real estate agents. This change promises to be impactful. With real estate commissions averaging 5% to 6%, the elimination of agents is bound to increase the liquidity of the market.