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  • Tim Kraemer

A Look Ahead at 2018

Now that we are a few weeks into the new year, it’s time we take a glance at what’s expected to happen in the real estate world in 2018.

One of the biggest topics right now is the “Tax Cuts and Jobs Act” which was passed at the end of 2017. This tax reform hits the real estate world in a few ways. This reform puts a cap on mortgage interest deductions for primary and secondary residences at $750,000. It also caps the state and local tax deductions at $10,000. This basically makes higher priced homes in the market as well as buying real estate in general less attractive. This reform will hit home prices dependent upon on location. Those facing the brunt of the impact will be homeowners in high-taxed states and expensive housing markets.

Mortgage rates are expected to increase as the year goes on. Mortgage rates in 2017 sat below 4% which helped off-set the rising prices in the market. Rates are expected to average around 4.6% throughout the year. By the end of the year people can expect a 5% rate for a 30-year fixed-rate mortgage.

Existing home sales are expected to slowly start rising this year. In 2017, the demand for existing homes exceeded supply steadily. It is forecasted that this trend will start to reverse in 2018.

New home sales are expected to pick up throughout the year as well, single-family home starts are forecasted to increase as much as 7%.

Along with increased supply and sales in the market, the homeownership rate is expected to stabilize in 2018. The rate hit bottom in the second quarter of 2016. But with more millennials taking the plunge in homeownership, this rate is expected to stay steady. There is some controversy here as the tax reform is predicted to make homeownership less appealing.

Only time will tell what will truly happen in the real estate market in 2018.

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