It’s a good time to be a homeowner. And, whether you believe it or not, it’s still a good time to become a homeowner. Whether it’s San Francisco, Omaha, Nashville, Boston, or any sizeable town in between, things keep looking up.
2018’s Top Trends in Real Estate
The real estate market is interesting in that it tends to closely reflect the larger economy. When the economy is doing well, the real estate market typically enjoys a lot of activity and appreciation. When the economy is in the dumps, foreclosures are high and values stagnate. Thankfully, the larger economy is in a good place in 2018, which means the real estate market is too.
As we put a bow on the first quarter of 2018 and transition into the second quarter of the year, there are a few trends driving the national real estate market forward. Let’s investigate a few of these trends in order to gain a better understanding of what’s happening outside your neighborhood.
- Home Sales Soar
Sales figures were down in January, but experts are dissuading people from correlating a slight dip in sales with dampened optimism. In reality, the disappointing sales figure were the direct result of a shortage in housing. (You can only sell what’s on the market.)
According to the Realtor.com 2018 forecast, there will be 2.5 percent growth in existing home sales this year. There will also be a 3 percent growth in home building. All in all, this points to steady gains.
- Home Prices Continue to Increase
As basic economic principles teach, prices go up when there’s higher demand than supply. So, when you consider that demand is certainly dwarfing the current supply of homes on the market, it stands to reason that home prices would continue to rise throughout 2018.
Every expert has their own opinion, but the Realtor.com forecast projects a 3.2 percent increase in home prices this year. According to the Home Buying Institute, bullish projections place the expected increase as high as 5.1 percent. Either way, values are going up and homeowners across the country can expect steady appreciation for the foreseeable future.
- Still a Chance to Refinance
Mortgage rates appear to have bottomed out in Fall 2016. They’ve increased a tad but are still at historically low averages – especially 15-year fixed rate mortgages. So, for homeowners that are sitting on high interest rates, now’s a good time to consider refinancing.
Despite the likelihood of rising interest rates in the coming months, many homeowners are failing to lower their rates through refinancing (largely because of misconceptions about the process). There’s an old theory that you should only refinance if you can save one percent. And then there’s the idea of breaking even on closing costs. But what most people fail to realize is that there are safe and cheap options – such as a zero-closing cost refinance.
“Zero-closing cost mortgages are precisely what their name implies – they’re mortgages for which there are, literally, no closing costs,” finance expert Dan Green writes. “When there are no closing costs, there are no break-even points to consider, and no one-point savings to monitor.”
It remains to be seen whether more homeowners will refinance, but the opportunity still exists. By this time next year, there are no promises that rates will still be this low.
- Boomerang Buyers
“The National Center for Policy Analysis estimates that as many as 10 million Americans were forced to foreclose on their homes during the housing bubble. The waiting period after a foreclosure is seven years, starting from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower,” financial guru Dave Ramsey explains. “This means around 1.5 million Americans are now eligible to re-enter the housing market.”
Labeled as “boomerang buyers,” these homeowners are going to further increase economic activity in markets that were hit the hardest in 2008 to 2010. As a result, home values in these areas will likely grow faster than national averages.
- Millennials Test the Water
At this point two years ago, home ownership rates in the country were at a historical low of 62.9 percent. By the third quarter of last year, that rate had finally ticked up to 63.9 percent. This year, it should continue to increase and inch much closer to 65 percent – a trend that is largely driven by an increased interest in home ownership among millennials.
After college, many millenials choose to move back in with their parents, or rent. But as millennials get older and start having children, the tides are shifting. Home ownership – and the financial security that comes with it – is finally becoming a dream.
“The largest home-buying generation since the baby boomers is growing up,” wealth management expert Barry Ritholtz writes. “To a large degree that is what’s driving the market. And, I suspect, this demographic is likely to continue being the central force in the real estate market for decades to come.”
- Hottest Markets
Big cities like Boston, San Francisco, New York, Los Angeles, Seattle, Houston, and San Diego will continue to be the hottest markets in the country. (This is largely due to a shortage of housing, which is driving prices up astronomically.) But look for other cities and areas like Nashville, Denver, Austin, Raleigh, and Fort Lauderdale to enjoy plenty of activity as well.
No Signs of Slowing
There’s no reason to believe that the real estate market will do much slowing down over the next 12-18 months. The economy is soaring, jobs are up, consumer confidence is at its highest point since 2000, and, other than a minor market correction earlier this year, the stock market continues to climb.
The question isn’t whether the market will continue to improve, but how much it will improve. Whether you’re on the East Coast, in the Midwest, or somewhere along the West Coast, things are looking up. And in a day and age where there isn’t much positive news, this is something we can all get behind.
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