It’s a fresh year and while we’re busy unwrapping our plans for 2018, housing and mortgage experts are still wrapping up the previous year in the US housing market.
Indeed, it’s been a great year. Challenges were abundant but the market managed to keep it under control. In fact, Freddie Mac just called it the best year in a decade for the US housing market.
As a new year sets base, will we expect the same track?
Real estate site TheStreet.com collated opinion from various mortgage professionals, investors, as well as buyers and sellers alike regarding the near future of the country’s housing industry. What they found out may not match the general enthusiasm of the past year.
[sc_content_link label=”Find a lender today!”]
New tax laws could impact prices
Some experts fear that limitations on mortgage interest deductions could result to more homeowners not itemizing their deductions or seeing the deductions per se as less of an incentive when buying a home.
And given that the upper end of the market is the major driver in home sale increases, new tax laws could mostly impact those high-end buyers.
“Some house hunters – particularly wealthy buyers – will see an increase in after-tax income making an already tough housing market even more competitive,” says senior economist at real estate site realtor.com, Joseph Kirchner.
“This increased demand could drive prices up even higher than they are already. And changes in the deductibility of mortgage interest and state and local taxes could cause challenges for many homeowners,” he adds.
More entry-level home constructions
The last few months of the year recorded the worst months for housing inventory. The good news is, builder confidence actually rated the strongest in 18 years so there might be hope in that for the slumping inventory market.
Experts predict that although housing inventory may not be able to totally recover and would, for the most part of the year remain low, there will be continued focus on new constructions, with emphasis on entry-level starts.
Allison Bethell of FitSmallBusiness.com says that because many people have been priced out of renting or purchasing, builders will try to fill that void by building more affordable housing options such as condos, townhomes, and single-family communities.
[sc_content_link label=”Get today’s mortgage rates.”]
Refinancing volume to decline
Due to rising interest rates, many homeowners who were able to take advantage of historically-low interest rates in the past few years will keep their deals and avoid refinancing. However, if you’re holding an adjustable rate mortgage with an initial rate that is higher than today’s average, you might want to consider a refi now before new highs kick in.
Strong employment fuels strong housing market
The solid economic growth that began in 2017 is projected to continue to 2018, driving strong employment and wage growth which in turn will also fuel demand for housing.
A rising bubble
There’s probably more to this than just random internet speculation. A combination of factors including the continued low housing inventory maintained by high construction costs, and the increased risks taken by banks with today’s high interest rates have very significant impact to home values. In the next few years, demand will be driven by more millennials entering the market, and more boomers looking to downsize their homes. If current market trajectories continue to move forward unhindered, it could reach unsustainable levels. Will we ever learn our lesson?