As the United States economy continues to improve to every homeowner’s benefit, more Americans are hoping to buy a home before interest rates rise further. Additionally, home values continue to rise, and the low supply of homes available for sale does not align with high demand. As the housing market continues to recover from the financial crisis of 2008, here are some real estate trends to follow in 2018.
Mortgage Interest Rates Will Rise
Many analysts speculate that the Federal Reserve will raise interest rates at least two times in 2018. Although many lenders have priced in the expected target interest rate increases, the 10-year Treasury bill is expected to rise to nearly 3 percent. Mortgage interest rates often mirror the interest (+ 2 percentage points) on the 10-year.
Home Values Will Rise
As the supply of homes for sale continues to remain low, sellers can raise their asking prices if demand remains strong. New-home construction is low as many developers and contractors are hesitant to start any full-scale projects. The shock of the housing crash a decade ago continues to linger with some contractors.
If home values rise significantly this year, it could price many new homeowners out of the market. Analysts say that several high-cost states, such as California and New York, are at levels that many new homeowners cannot afford. The estimated rise in home values for 2018 ranges anywhere from 3.3 percent to 5.5 percent.
Banks Will Open Up Mortgage Loan Availability
Some analysts say that banks will start to aggressively pursue new borrowers. For years after the mortgage meltdown, banks tightened their lending requirements and many borrowers could not qualify for purchase or refinance home loans. However, many banks, especially nontraditional banks, are now offering new mortgage loan products with a diverse range of options. Borrowers who could not qualify because of minor credit issues or gaps in their employment will now have options to help them purchase a new home or refinance an existing mortgage.
If new home construction remains stagnant in 2018, there could be a significant increase in home values. Some analysts believe that many of the major housing markets in the U.S. today are already overvalued. Additionally, a rising mortgage interest rate environment combined with the new tax law limiting property and mortgage tax deductions could hit homeowners in several states hard.