The Market Shows No Signs of Cooling Down in 2018
If the first quarter of the year is any indication, potential buyers in 2018 will continue to compete for housing in a small pool of homes.
You spent days, weeks, and months scouring all the real estate listings. You have your list of “must-have” features for your new home. Just as you begin to despair, you find it – your dream home. You submit an inquiry via the listing, call the listing agent to leave a voicemail and wait with anticipation. You wait anxiously for a return message and when you see the number on your phone, you answer it on the first ring. Before you even get out a quick hello, the agent is already saying “Thank you for your inquiry, but this home is already under contract.” It’s an all too common situation in today’s housing market and, frustrating as it may be, it doesn’t seem that the situation will get better for potential buyers any time soon.
Lack of Existing Housing
The imbalanced supply and demand that has plagued the market for the last 12 months is likely to continue throughout much of 2018. With fewer homeowners opting to sell, the supply of starter homes will remain low, driving prices up throughout the year. This lack of supply is creating affordability issues as many looking to purchase are finding that their budgets will need to be stretched to accommodate current selling prices. Experts are urging buyers to exercise caution and realism about what they can afford, as a willingness to spend more than the recommended 30% of monthly income on housing could spell disaster for many new buyers down the road.
Rising Interest Rates & Mortgage Interest Deduction
Existing homeowners are hesitant about the prospect of acquiring a new mortgage. Many owners who bought when interest rates were at historical lows are reticent to re-enter the mortgage market now that rates have begun creeping up. For those looking to buy, the rising interest rates may mean that buyers are seeing less bang for their buck. Though, with Millenials beginning to settle down and seeing their salaries increase, the major hurdle seems to be convincing existing homeowners to re-enter the market.
Another deterrent for sellers is the recent change to the mortgage interest deduction cap. Previously, tax law allowed homeowners to deduct the interest on mortgages up to $1 million. Changes this year brought that cap down to $750,000. For existing homeowners in higher value markets, this loss of valuable year-end deductions could mean the difference between selling or staying put.
Rents on the Rise
Increasing rents is one of the reasons that so many young home buyers have become increasingly motivated to enter the housing market. With rents increase 4% nationwide over the last 13 months, the prospect of spending hard-earned income on real estate they’ll own has become increasingly more appealing than spending more on temporary housing.
Though existing housing supply shortages can be expected to continue, a bright spot in the market is new housing construction. With lingering concerns plaguing the market, contractors have chosen to focus more on the building starter homes in the last 9 months. So home buyers looking to make their housing budgets go further and for more selection may be better served at looking into newly constructed housing in 2018.
Do you have any thoughts on the housing market in 2018? Leave us a comment below.
EXIT Realty Bob Lamb & Associates is Murfreesboro’s most innovative real estate team.
EXIT Realty Bob Lamb & Associates
2630 Memorial Blvd, Murfreesboro, TN 37129