This is the time of year that all the economists come out with their predictions for our real estate for the coming year…. and they do apply to our Perdido Key real estate market!
Interest rates – the economists agreed unanimously that, following several years of dormancy, 30-year fixed rate mortgages could finally rise from the current average rate of 3.9 percent — but they were divided on just how much it would increase, with most predicting they would stay well below 5 percent.
Inventory shortage – “The housing shortage will persist in many markets due to the legacy of slow rate of homebuilding over the past decade,” said Lawrence Yun, chief economist at the National Association of Realtors. “But due to the tax reform, [provisions] providing less financial benefit to be a homeowner, the overall price increase will be much softer in 2018, by 2-4 percent.”
Inventory will continue to drive the market. According to the latest existing-home sales report, total housing inventory is in its 29th consecutive month of year-over-year declines, and Richardson doesn’t foresee any real change except for a small uptick in inventory at the end of 2018. Buyers looking for reasonably-priced starter homes won’t have much luck since inventory at this tier level is expected to stay at seven-year lows.
Don’t worry about a housing bubble. Home prices have been rising at breakneck speed, causing some economists and housing experts to sound the alarm for an impending housing bubble. But Redfin chief economist Nela Richardson says two factors — the sale-to-list ratio and the homebuyer debt — will keep the bubble at bay. Although home prices are at 10-year highs, homeowners and buyers seem to be in agreement about listing prices, as evidenced by a 99 percent sale-to-list ratio in the nation’s most high-priced markets. Furthermore, Richardson says buyer loan-to-value ratios have continued to tumble.
Tax Reform – There will be consequences for many homeowners and potential buyers with the new tax reform bill…. The decreased mortgage interest deduction, along with the limit on state and local taxes (SALT).