First Quarter Real Estate Market Update

Housing Market Recap and Predictions Happy New Year from your friends at The Mittelstaedt Team! As a homeowner or homeowner to be, the state of the 2017 housing market and expectations for the 2018 market can help you plan for the future. Let’s take a brief look at a recap of the year along with ...

Housing Market Recap and Predictions

Happy New Year from your friends at The Mittelstaedt Team! As a homeowner or homeowner to be, the state of the 2017 housing market and expectations for the 2018 market can help you plan for the future. Let’s take a brief look at a recap of the year along with housing market experts’ predictions for the coming year.

Market Recap

While there was a slight dip at one point during the year, prices caught up, and the year ended on a positive and optimistic note.

  • By the end of 2017, both new home sales and sales of previously-owned homes were at the highest level in a decade.
  • The end of 2017 marks starts of single family homes at their strongest in a decade, and applications to build such properties advanced at the fastest pace since August 2007.
  • According to the 2017 Buyer Traffic Report for September, October and November (the most recent months available at this time), buyer activity during those months was higher than any other time during the year, including the typically stronger spring buyer’s market of March, April and May.
  • According to CoreLogic’s chief economist, looking on a year-over-year basis at year-end, single-family residential prices grew in excess of 6% for four consecutive months. This is the longest such streak since June 2014.
  • Over 100 experts surveyed by Home Price Expectations expect a house purchased at $250,000 this past January to increase in value almost $50,000 over the next five years.

Predictions for 2018

A strong end to 2017, rising home prices and increased home equity lead to optimism about the 2018 housing market.

Impact of New Tax Bill

Many homeowners and homeowners-to-be are curious about how the new tax bill will impact the housing market. While media seems to be touting a negative impact on the housing market, a recent survey supports a more optimistic view.

Impact of the tax bill on selling:

  • 71% of those surveyed will not be delaying housing sales because of the tax bill. Of those who do not expect delay, the majority of those do not expect the tax bill to have any impact on their home sale while some expect they would sell faster because of new tax laws.
  • A smaller percentage still plan to put their homes on the market but expect it to take longer to sell. An even smaller percentage believe they might postpone the sale of their home.

Impact of the tax bill on buying:

  • More than 40% expect to either jump into the market sooner or do not believe the tax bill will impact their decision in any way.
  • About 25% believe they will either purchase a less expensive home or postpone their purchase due to their perceptions of the tax bill.

Increases in Home Equity

Increases in home equity provide further optimism for a strong 2018 housing market. Homeowners with more than 20% equity in their home feel comfortable selling a house and buying another home. Homeowners that had been locked up with negative equity or minimal equity situations over the last few years are being released from those situations into readiness to make a move.

  • 95.1% of all homes in this country have a positive equity situation.
  • The equity people have in their homes is considered significant equity. That is, 30% of homes have 100% equity (no mortgage), and of the 70% with mortgages, 82.9% have more than 20% equity in their homes.

Mortgage Rates and Appraisal Alignment

Freddie Mac, Fannie Mae, the Mortgage Bank Association and the National Association of Realtors all expect a dramatic increase in the number of houses sold for 2018, as reflected in a predicted average mortgage rate increase of about a half a percent this year from the current rate of about 4% to 4.5% (average from the 4 groups) by the 4th quarter of 2018.

According to Bill Banfield, the Vice President of Capital Markets at Quicken Loans, it’s encouraging to see opinions from homeowners and appraisals more aligned on a national level with a less than 1% difference.

Home Price Increases

How does all of this housing data impact home prices? Here’s what a nationwide panel of over 100 economists, real estate experts, and investment and market strategists tells us about their home price predictions for the next five years.

  • According to the survey, this panel predicts that, following an increase of 5.6% in 2017, prices will increase by 4.2% by the end of this year.
  • The panel expects home prices to level out to normal historic numbers of about 3 to 3 1⁄2% over the next 5 years.
  • Prices will go up over the next five years about 23.4% in a cumulative fashion. While the most optimistic of this group expect a 34% increase over the next 5 years, none surveyed predict prices going down. Even the least optimistic surveyed predict increases of more than 10.4%.

Wrap Up

The tax bill, mortgage rates, home price surveys. All this information impacts you as a homeowner or homeowner to be. If you have any questions about the housing market or are ready to discuss a move, contact The Mittelstaedt Team today. We can help you find the answers you need. 

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