Buyers and sellers in our current market would do well to keep these four trends in mind as they formulate and carry out their real estate plans this year:
1. Inventory is swelling, meaning there will be more homes on the market. It isn’t increasing terribly quickly; it’ll likely stay under a 7% rise. Many of the homes on the market will be luxury homes. Last winter, we did have the lowest recorded inventory in our history, so those on the market should expect a correction in that trend this year.
2. Affordability will be tough for buyers. If interest rates go up from 5% to 5.5%, that will increase a person’s monthly mortgage payment by 8%. With incomes only increasing by 3%, buyers will face a double whammy in the way of home affordability this year.
3. Millennials are dominating the market. Once the new kids on the block, millennials now constitute 45% of all homebuyers. Some of them are now moving out of their starter homes and into their second homes. Millennials are accustomed to a certain lifestyle; they like to travel, and yet they also have a lot of student debt coming out of school. These factors are causing many of them to be cautious about what they’re buying for the new year.
4. The tax law is still a wild card. We still don’t really know what will happen with the changes in tax law, so unless you have a very savvy tax advisor looking out for you early, you may either be hit with a large tax bill or a refund. Either way, that will affect the size of the mortgage that people are comfortable taking out.
Hopefully this has been educational to you, and if you have any questions about market trends to look out for this year, feel free to reach out to me directly. I hope to hear from you soon!