US house prices have been fluctuating ever since the Great Recession in 2006.In 2007, when the housing bubble burst, the typical American home lost 23% of its value. Up until 2012, US house prices continued to decline significantly reaching bottom low. In 2012, US house prices started to bottom out and regain value. Today, the US housing market has gained back all $9 trillion in value lost when the market collapsed. The median home price in the US real estate market this year is $213,146, with a median list price per square foot of $141. This is about an 8% increase in US house prices as compared to last year. US house prices will continue to rise within the next year with an additional 4% in growth, as house price trends predict. Buying an investment property would make a good choice today.
Hurry before house prices rise too high and become less affordable!
Are you wondering what other house price trends 2018 will foresee and how to protect against any instability? Don’t worry, in this article, we will walk you through the various house price trends that will be foreseen in 2018 and that you need to be aware of. Mashvisor and its team are always looking out for their real estate investors and are, therefore, providing below house price trends to account for when investing in real estate.
Related: What to Expect in US Real Estate Trends Over the Next 10 Years
House Price Trends of 2018: Effect of Tax Bill Passed in December of 2017 on Home Prices
Toward the end of 2017, President Donald Trump signed the Tax Cuts and Jobs Act into law. This new legislation calls for a significantly lowered corporate tax rate and reduced tax rates for individuals with higher standard deductions. The Bill, moreover, institutes caps on mortgage interest deductions and state and local tax deductions. Specifically, the law allows interest to be deducted on mortgage only worth up to $750,000, instead of what previously was a $1 million limit. The law, furthermore, put a $10,000 cap on the amount of state and local taxes, including property taxes, that can be deducted from the federal return. What does this mean? And, how would such bill impact house price trends in the US and influence decision-making for real estate investors and homeowners?
Impact on Mortgage: Well, if you are looking for investment properties that cost higher than $750,000, you will be bound to deducting the interest on up to $750,000 in mortgage debt only. While previously done before, real estate investors could claim interest on up to $1,000,000 in mortgage debt. Not only will this new law hurt homeowners who live in expensive housing markets, but it will also deter those looking to trade up to a home costing more than $750,000. This, as a result, will likely constrain the tight supply of less expensive investment properties and drive prices up. For many real estate investors, house prices will become less affordable.
Impact on Tax: The new law called for capping state and local tax (SALT) deductions at $10,000. Before this law, property owners could claim all property taxes as an itemized deduction. The new law, on the other hand, bundles all “SALT” taxes together and limits the deduction to $10,000 in total for both individuals and married couples. Real estate investors who live in high-tax areas such as New York, New Jersey, and California will likely suffer greatly. For homeowners living in such high-tax areas, $10,000 would fail to even cover investment property and income tax bills. Capping the tax deduction will, consequently, make high-end investment properties more expensive and gradually bring down prices in that segment of the market.
House Price Trends of 2018: Short Inventory of Housing Raising House Prices
Of the house price trends that carried over from 2017 to 2018 is the short inventory of homes. The main reasons why home supply remains a constraint are: first, the lack of homeowners’ incentive to sell their homes. Second, the paucity of home construction. Real estate developers yet build homes but the demand continues to outpace that of supply, therefore raising house prices.
You might wonder why real estate developers are not building more residential properties if there’s an increasing demand for housing. Well, real estate developers remain discouraged because of the high cost of land, skilled labor, and building material. Not to neglect the lack of buildable space that has deterred developers from building more residential properties. Certainly, finding an investment property today to suit your needs has become difficult. Don’t get discouraged yet.
With Mashvisor, you can find a residential property or a real estate property to align with your needs and at a price to match your budget. To start looking for and analyzing properties, click here!
House Price Trends of 2018: Mortgage Rates Are Bound to Increase
The new tax law which has now given less incentive for homeownership, along with the rising mortgage rates will likely widen affordability gap for many real estate investors. Last year, the average rate on a 30-year, fixed mortgage rate was 3.78%. Today, as of March of 2018, the benchmark 30-year fixed-rate mortgage averaged 4.44%, a 0.66% increase from last year. Financial analysts forecast mortgage rates to continue to rise in 2018 and beyond. This means that financing a mortgage for investment properties could become more expensive over time.
In a survey by Redfin, a quarter of respondents claimed to slow plans if mortgage rates were to reach 5%. One fifth would move more hurriedly to invest in property before mortgage rates rose higher and homes became less affordable. Whether more people become homeowners/real estate investors or refrain from purchasing an investment property, mortgage rate will certainly impact house prices. Ensure to account for fluctuations in mortgage rates as they can weaken your purchasing power as a real estate investor.
Related: What Are the Expected Residential Real Estate Trends in the US Housing Market for 2018?
House Price Trends of 2018: Millennial Demand for Housing Is Bound to Increase Thus Increasing Prices
As Millennials are integrating into the workforce, they have come to constitute a bigger share of the housing market. U.S. Census Bureau data shows that homeownership rates for householders aged 35 years and less have increased to 36%. This is about a 1.3% increase from that of last year. While you might find a 1.3% insignificant, this increase is by far the largest increase of any age group. The shift towards homeownership has been apparent as more Millennials continue to settle down and start their families. The increasing pool of millennials becoming homeowners has consequently lead to more demand for housing. The increased demand has consequently caused house prices to increase. This trend among a few other house price trends will most likely persist in the upcoming months and years.
House Price Trends of 2018: States with the Most Growth
In 2017, five Western states had the largest house price gains, four of which experienced a double-digit growth. These states and their percentage home gains are:
- Washington: 12% home price gains
- Nevada: 11% home price gains
- Idaho: 10.70% home price gains
- Utah: 10.70% home price gains
- California: 8.20% home price gains
Beware! This trend, of all house price trends, is likely to persist for some time.
Related: Housing Market Trends: How Airbnb Affects Home Prices and Rents
House price trends indicate that home prices will likely continue to increase due to the short inventory of homes, new regulations passed removing incentives for home ownership, and the rising mortgage rates. Not to neglect the millennial factor: as more millennials are becoming owners as opposed to renters, demand for housing has increased and so has prices.
While you might feel a bit discouraged to buy an investment property, using Mashvisor assures you will find a property to suit your real estate investing budget. If you are looking for a rental property and need to assess cash on cash return and other metrics, Mashvisor’s rental property calculator will make calculations a lot simpler for you.