Redfin, a national brokerage and real estate research company, this week issued its predictions for residential market trends and strategies in 2018. Attributed to Redfin’s chief economist Nela Richardson, the predictions in general suggest it will be another year in which sellers have more control than buyers in much of the country. A big variable is the impact of the tax legislation now winding through Congress.
Here are the predictions and some excerpts from Redfin’s statement about them:
1. Home buyers will leave high-tax states if state and local tax deductions are eliminated in the tax overhaul.
“In a survey of 900 home buyers, one-third of respondents said they would consider moving to another state if they could no longer deduct state and local income and property taxes. The housing markets affected by potential tax changes account for one in four of the homes sold this year in the metros Redfin tracks.”
2. Fewer homeowners will sell due to new residency requirements in tax bills.
“Under current law, single homeowners can exclude $250,000 of sale proceeds from capital gains taxes as long as they have lived in the home for two out of the previous five years. Couples can exclude up to $500,000. However, the new proposal increases the number of years to five of the previous eight years, in order to deduct gains. This change will incentivize some homeowners to stay in their homes longer.”
3. Wealthier millennials will popularize “urban suburbs.”
“Certain high-income millennials are driving the formation of a new kind of neighborhood — the urban suburb. These home buyers want an urban lifestyle, including walkability and amenities, and also they want highly rated schools. ... Builders are responding by building homes with two or three bedrooms near public transit, restaurants and retail.”
4. Homes will sell faster.
“The 2017 housing market was fast, with 25 percent of homes selling in two weeks or less during the peak of the buying season, and nearly 1 in 5 homes (19 percent) off-market in less than a week. We expect 2018 to be even faster.”
5. Mortgage payments will increase at the highest rate in a decade.
“We expect the 30-year mortgage rate to inch up to between 4.3 and 4.5 percent in 2018. In October, the Federal Reserve began reducing the size of its $4.5 trillion asset portfolio that includes $1.7 trillion in mortgage securities. Mortgage rates are expected to slowly increase as a result of this portfolio reduction.”
6. No price bubbles, even in the hottest markets.
“We do not see a bubble anywhere in 2018 for two main reasons: First, buyers and sellers remain on the same page when it comes to price, with a sale-to-list ratio at 100 percent or above in the most expensive West Coast markets this year. ... Second, in West Coast metros where prices have now surpassed their 2006 peak, home buyer debt has declined.”
7. ‘Golden Girls’ and ‘Friends’ return.
“Roommates accounted for 6.6 percent of all households in 2017, according to census data. A decade ago, roommate households were just 5.6 percent of the population. We believe the trend of more people living with roommates will accelerate in 2018 due to the lack of affordability combined with new startups aimed at solving the problem.”