Guest Post by Broker/Owner Chris Beason
If you're tired of negativity surrounding the change in administration, you may want to go speak with someone in the real estate industry for a more positive outlook on the times ahead. This time of year, we like to get input from a variety of sources on the outlook for the coming year. By asking general questions about potential strengths, weaknesses, opportunities, and threats in the coming year to various sectors of the real estate markets, we gather a tremendous amount of input on what's in store. We expected comments relating to the instability and unpredictability surrounding any administration change. But this year there seems to be a tremendous amount of optimism about the real estate market in the coming year and most of the excitement was around some general opportunities:
- Strong Market Conditions & Stable Home Price Appreciation
- Pent-up demand in the upper-end
- Buyer urgency - National forecasts are for mortgage interest rates to gradually increase to between 4.5%-5.0% by year end.
- Preferable regulatory environment
- NAR predicts more first time buyers and that millennials will finally get into the market.
- We at Ruhl&Ruhl Realtors are budgeting for sales to be up over last year … and last year was our best in our 154 year history!
Pent-up demand in the upper-end
Some of the proposed tax reform by our new administration is anticipated to stimulate the upper-end market. Many people are also expecting an increase in activity in the upper price ranges due to the inflow of people who were sidelined in 2016 due to the uncertainty of the election.
Buyer urgency - National forecasts are for mortgage interest rates to gradually increase to between 4.5%-5.0% by year end.
Housing activity has been strong in January, with inventory moving at a faster rate as demand continues to outpace supply. "We saw evidence of a stronger than normal off-season starting last September and October due to pent-up demand and surging interest from first-time buyers," says realtor.com Chief Economist Jonathan Smoke. "Since the election, demand seems to have intensified, potentially as a reaction to mortgage rates rapidly moving higher. The threat of rates approaching multi-year highs in the months ahead is creating a sense of urgency. The downside to this strong off-season is that we have started 2017 with a new low volume of available homes for sale and a new high for prices."
Preferable regulatory environment
Everyone seeking regulatory reform has high expectations. The incoming administration is champing at the bit, but we all have been around long enough to see reality set in and things not happen as fast as a new regime hopes or promises.
- Proposed changes to 1031 exchanges
- Proposals to drop the mortgage interest deduction on second homes and/or for individuals/families with "high" incomes).
- "The Choice Act," an amalgamation of several bills -- including our "Mortgage Choice Act" -- that tweak Dodd-Frank
- Flood Insurance looks like it will be getting attention, not only because of various crisis situations and expired coverage, but also because we see NAR bringing this up as a priority in key meetings.
- NAR is pushing for passage of a "Regulatory Accountability Act" (H.R. 5) and the "Regulations from the Executive in Need of Reform Act" (REINS).
- Efforts to rein in the CFPB are on many industries' agendas, including ours.
- Some CPFB fixes are included in the Choice Act, but some would prefer to get court rulings first to establish these issues for all current and future agencies.
NAR predicts more first time buyers and that millennials will finally get into the market.
Urgency for Sellers Real estate is not only about location. Most of the time it's also about timing. Our current market conditions present great opportunity. Most of the time our market conditions either favor buyers or sellers, but not both. When it's a strong market and there are a lot of buyers in the market, it's generally a good time for sellers because they can get top dollar for their property in a shorter amount of time. So, low inventory (supply) and high demand means a sellers market. This is the case when we have less than four months of inventory - or at the current rate of sales, it would take four months or less for the market to absorb all the properties that are for sale. On the flip side, when there are a lot of properties for sale and fewer buyers in the market, buyers will find them in a stronger position because they have a lot of properties to choose from and sellers compete for those buyers - generally on price. Most people think it's best to wait until spring to list their property, because there will be more buyers at that time. It's true that there is greater demand in the spring and more properties will sell in the spring than in the winter months. However, this reasoning does not take into account the number of other sellers who are also competing for those same buyers. Supply and demand has a huge impact on real estate values, sellers need to take this into account in order to put themselves in the best position to get top dollar for their property.
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