2018 will likely bring a number of homebuyers out of the woodwork, to the benefit of real estate investors prepared to work with them. Although many would-be buyers have remained on the sidelines since the housing crash, a number of factors are likely to force their hand in the New Year. For real estate investors holding properties in their portfolios that might be attractive to these buyers or able to access deals on these types of properties, 2018 will be full of opportunity.
A Push to Ownership
One thing that will have a big effect on homebuyers’ mindset is the possibility that mortgage interest rates will rise in 2018. Most analysts agree that this is a near certainty at this point, and the Federal Reserve raised interest rates three times in 2017. The Fed announced at the end of 2017 that it planned to raise rates three times in 2018, which would certainly raise 30-year fixed-rate mortgage rates above four percent, where Wells Fargo placed them at the end of December.
1| If buyers start to feel that their window of opportunity to buy near historically low interest rates is closing, then many will begin to investigate purchasing a home more seriously than they did last year.
Another factor in many buyers’ decision to move toward homeownership will likely hinge on marketing from banks and mortgage lenders. For nearly a decade, homeowners have demonstrated a surprising lack of awareness of programs designed to help them purchase properties at low interest rates and with down payments lower than the “standard” 20 percent of the purchase price. One real estate broker recently told TheStreet.com that he expects banks to “finally open up lending and…offer so many more diverse loan products” this year.
2| As buyers become more aware of their borrowing options, they are more likely to begin looking for properties to buy. This will also be true for other investors.
Finally, some analysts predict that the newly passed tax reform bill will spur second-home purchases for many Americans. The trend will likely extend to interest in owning Airbnb properties and other vacation rentals, both in retirement portfolios and in other investment vehicles.
3| Whether you sell second homes and vacation homes or specialize in managing these types of investments, your expertise could be a hot commodity in 2018.
Of course, as with any market predictions, these trends can and will shift based on global events and economic changes during 2018. Savvy real estate investors will plan for buyers to become more active in the coming year but also be prepared to work around complications including limited housing inventory, high levels of unaffordability, and international events that could place stress on the U.S. economy.