January 2018

6 Predictions for the 2018 Housing Market  and Economy

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Expect slowed price growth and modest improvement  in the number of homes for sale

by Matthew Gardner
Inman.com

It's the time of the year when I look deep into my crystal ball to see what's on the horizon for the upcoming year. As we are all aware, 2017 has been a stellar year for housing across the country, but can we expect that to continue in 2018?

Here are my thoughts:

Millennial homebuyers

Last year, I predicted that the big story for 2017 would be millennial homebuyers, and it appears I was a little too bullish.

To date, first-time buyers have made up 34 percent of all home purchases this year - still below the 40 percent that is expected in a normalized market.

Although they are buying, it's not across all regions of the country, rather they are currently attracted to less expensive markets, such as North Dakota, Ohio and Maryland.

For the coming year, I believe the number of millennial buyers will expand further and be one of the biggest influencers in the U.S. housing market. I also believe that they will begin buying in more expensive markets. That's because millennials are getting older and further into their careers, enabling them to save more money and raise their credit profiles.

Existing-home sales

As far as existing-home sales are concerned, in 2018, we should expect a reasonable increase of 3.7 percent - or 5.62 million housing units.

In many areas, demand will continue to exceed supply, but a slight increase in inventory will help take some heat off the market. Because of this, home prices are likely to rise but by a more modest 4.4 percent.

New-home sales

New-home sales in 2018 should rise by around 8 percent to 655,000 units, with prices increasing by 4.1 percent. While housing starts - and therefore sales - will rise next year, they will still remain well-below the long-term average due to escalating land, labor, materials and regulatory costs.

I do hold out hope that home builders will be able to help meet the high demand we're expecting from first-time buyers, but in many markets it's very difficult for them to do so due to rising construction costs.

Interest rates

Interest rates continue to baffle forecasters. The anticipated rise that many of us have been predicting for several years has yet to materialize.

As it stands right now, my forecast for 2018 is for interest rates to rise modestly to an average of 4.4 percent for a conventional 30-year fixed-rate mortgage - still remarkably low when compared to historic averages.

Tax reform

Something that has the potential to have a major impact on housing are the current proposals relative to tax reform.

As I write this, we know that both the House and Senate propose doubling the standard deduction, and the House plans to lower the mortgage interest deduction from $1 million to $500,000. If passed, the mortgage deduction would no longer have value for homeowners who would likely opt to take the standard deduction.

If either of the current proposals is adopted into law, the potential reduction in mortgage-related tax savings means the after-tax cost of homeownership will increase for most homeowners.

Additionally, both the House and Senate bills also end tax benefits for interest on second homes, and this could have a devastating effect in areas with higher concentrations of second homes.

The capping of the deduction for state and local property taxes (SALT) at $10,000 will also negatively impact states with high property taxes, such as California, Connecticut and New York.

Furthermore, proposed changes to the capital gains exemption on profits from the sale of a home (requiring five years of continuous residence as compared to the current two) could impact approximately 750,000 homesellers a year and slow the growth of homeownership.

Something else to consider is that all of the aforementioned changes will only affect new-home purchases, which I fear might become a deterrent for current homeowners to sell. Given the severe shortage of homes for sale in a number of markets across the country, this could serve to exacerbate an already persistent problem.

Housing bubble

I continue to be concerned about housing affordability. Home prices have been rising across much of the country at unsustainable rates, and although I still contend that we are not in "bubble" territory, it does represent a substantial impediment to the long-term health of the housing market.

But if home price growth begins to taper, as I predict it will in 2018, that should provide some relief in many markets where there are concerns about a housing bubble.

In summary, along with slowing home price growth, there should be a modest improvement in the number of homes for sale in 2018, and the total home sales will be higher than 2017.

First-time buyers will continue to play a substantial role in the nation's housing market, but their influence may be limited depending on where the government lands on tax reform.



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Don't Hire a Home Stager Without Asking These 10 Questions

By Daniel Bortz | Dec 26, 2017
realtor.com


Can a savvy home stager be the secret to selling your home fast-and for top dollar? Many real estate experts say yes.

Home staging entails hiring an experienced professional to bring in furniture, accessories, and art that will make your house look its best and appeal to the appropriate buyer. If you're still living in the home, a home stager will rearrange your existing furniture to wow buyers.

"The goal of a stager is to attract the largest possible number of would-be buyers and get the home sold at the highest price, all in the shortest period of time," says Andrew Sandholm, a real estate agent at BOND in New York City.

Of course, staging requires an investment upfront. Most stagers charge $300 to $600 for an initial design consultation, and then $500 to $600 per month, per room. But staged homes sell on average 88% faster and for 20% more than non-staged homes, according to industry data.

Still, if you're going to reap those rewards, you need to find a good home stager. You can start your search by asking your real estate agent for recommendations; then meet with each. The following questions will help you determine the best home stager for the job.

1. What training have you received?
You certainly don't need formal training to have a great eye for interior design, but being accredited by the Real Estate Staging Association (RESA) means that a practitioner is held to certain standards. To become a RESA member, stagers must pass an ethics exam, have home staging business insurance, and have at least one year of staging experience.

2. How many average days were your staged homes on the market last year?
Finding an experienced stager is important, but finding a successful one is paramount. "A stager can be great at getting contracts, but if their homes don't sell, they're going to be a waste of money," says Sandholm. Try to find a stager whose homes sell within 30 days, since that's usually the point at which listing agents advise clients to make a price reduction.

3. What's the typical price range of the homes you stage?
You want someone who specializes in staging homes that are similar to yours. For example, "If you're selling a starter home, you wouldn't want to hire a stager who specializes in luxury homes," says Sandholm.

4. How do you stay on top of interior design trends?
The person you hire should be able to explain how he or she keeps up with the furnishings and decor trends that make buyers come running. Do they attend conferences? Do they actively preview new listings? Do they hobnob regularly with other stagers and decorators to learn about the latest and the greatest?

5. Can I see photos from your three most recently staged homes?
You can ask a stager to see their portfolio, but it may not be an accurate representation of their work. "They're only going to show you their best work," says Sandholm. But, looking at stagers' most recently staged homes will give you a better idea of the quality of their work.

6. What are your rates?
Most stagers charge a monthly fee, but some charge a flat fee per room for the duration of the listing, says Chris Dossman, a real estate agent with Century 21 Scheetz in Indianapolis, IN. You'll want to get quotes so that you can budget appropriately. If you're tight on cash, consider only staging a few rooms, especially the living room, kitchen, and master bedroom-which make the greatest impression on home buyers, according to a recent National Association of Realtors survey.

Know that staging costs can vary depending on where you live. If your home is vacant, and you want the entire house staged, prices can range from as little as $975 a month (Indiana) to $5,500 a month (California), according to RESA. If the home has some furniture, you're looking at between $700 (Iowa) and $4,800 (California) a month for a two-month staging contract.

7. How much time will it take you to stage my home?
"Usually, it only takes one to two days to stage a home, but good stagers are busy," says Dossman. Availability may wind up being a determining factor in who you hire. If a stager says it's going to take a week or longer, find out why. "If the person plans to stage your home with furniture that's tied up in another listing, that's a red flag," says Dossman.

8. Is your business covered by insurance?
There's a chance your home could get damaged when the stager moves furniture in and out, so make sure the business has insurance to ensure you're protected. For due diligence, ask to see proof of coverage.

9. What can I tackle myself?
A reliable stager will be honest with you about what projects you can do yourself to save money. For example, if only one room needs a fresh coat of paint, that's something you can take on. Once hired, a good stager will also offer tips on little things that you can purchase to make your home more inviting, such as candles and fluffy towels for the bathrooms.

10. What style would you recommend for my home?
This is a bit of a trick question, but it's worth asking. "You want a neutral stager, since you're trying to cast the widest net possible," says Sandholm. In other words, you don't want to hire someone who has an overly narrow design aesthetic.

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