Will inventory remain low? Will tax reform redefine where people choose to live? Will it make more sense to rent or own? How does the market move forward from so many natural disasters?

  • Low inventory will continue to create stress in many markets. Tax reform may redefine where people live and invest in real estate. Natural disasters will become more concerning for buyers and sellers and have direct financial affects on insurance and sale prices.

Will inventory remain low? Will tax reform redefine where people choose to live? Will it make more sense to rent or own? How does the market move forward from so many natural disasters?

Looking into my crystal ball, here are my top eight predictions for 2018:

Affordability

Affordabilty remains a challenge, and the word “affordable” is a relative term depending on the geography of one’s real estate market.

In Silicon Valley that may mean buyers are challenged to find anything decent under $2 million, and for others in typically affordable but fast-appreciating cities like Nashville, trying to find a home under $300,000 may be nearly impossible.

Builders aren’t building new housing to meet the needs of first-time homebuyers or those on fixed incomes, which includes many empty nesters due to rising land acquisition costs.

Due to the upswing of the real estate market over the past several years, new construction is booming, and the developers are passing the cost of this demand on to builders in terms of more expensive land prices. And the builders, in turn, are sharing that love with buyers in terms of higher base prices and expensive lot premiums.

It is growing more challenging, even in smaller to mid-size cities, to find an affordable property to purchase that doesn’t need significant work (like dwindling foreclosure inventory with multiple offers).

Limited wage growth relative to real estate prices and rising interest rates may continue to push affordability that much more out of reach.

Migration and mini real estate booms

Once tax reform is implemented and people have had time to adjust to a “new normal,” look for potential migration and/or an increased exodus from states with a high cost of living, burdensome income tax rates and harsh weather in favor of states with lower cost of living, no state income tax and milder climates as further incentive to relocate.

For those who have the flexibility to live anywhere, there could be an increase in people looking to move to no income tax states such as Florida, Nevada, Tennessee and Texas.

These states have already experienced a significant increase in their populations due to the aforementioned reasons before tax legislation was passed, now those real estate markets may experience an increase in demand that could push their prices higher and tighten supply that much more.

Conversely, states such as Connecticut, Illinois and New York may see a slow down in their real estate markets with less buyer interest as well as cost prohibitive reasons to move there altogether. It may make more financial sense for those living and working in these areas to rent.

Conversely, buyers may seek out lower-priced homes to take advantage of the lower mortgage interest and property tax deduction limits.

Owners of higher-end homes may put their homes on the market well ahead of their plans to move, recognizing it may take much longer than previously anticipated to sell.

Cryptocurrency, blockchain and the ‘instafying’ of real estate

With bitcoin becoming all the rage, look for the envelope to continue to be pushed in this regard.

If it starts happening with more frequency in California, you can bet that other markets will start to follow the trend, particularly in regions of the country that have a lot of interest from foreign buyers as well as in technology rich employment areas with high wages and a savvy audience of forward-thinking buyers.

Speaking of automation, can the real estate transaction be “instafied”?  Blockchain technology and several apps are in development attempting to boil down a 30-60 day process to a matter of days.

Want to buy a house? There’s an app for that.

Redevelopment

With available land in prime areas at a premium or practically non-existent, look for developers and builders to continue to find more creative ways to redevelop property with old and outdated living structures in favor of newer and more functional living and work spaces.

Those parcels of land upon which super-sized functionally obsolete homes sit are ripe for redevelopment.

Net neutrality

Just like tax reform, we aren’t sure of the full effects of this one yet, but you can be sure that large internet providers will take advantage of this in whatever ways they can to tip things in their favor.

Access to all content may no longer be created equal, and the same may go for consumer real estate websites.

Will popular sites like Zillow or large national brokerages team up with some of the biggest broadband behemoths to ensure that their subscribers won’t miss out on the latest listings in real time?

And for others not on “XYZ” network, will they only have access to limited data on these sites and/or painfully slow surfing capability?

Natural disasters and the real estate market

It’s only a problem when it happens to you. Well, maybe. If you don’t live in the path of hurricanes, floods and fires you are lucky.

It can be hard to relate to what you are watching on television with mandatory evacuations, people’s lives boiled down to portable plastic boxes, no power for days or weeks and places of familiarity completely devastated.

Living through such incidents can make even the most seasoned of residents question their decision to continue to live in these areas — risk versus reward — as well as raise red flags and concern with potential buyers interested in relocating to the same places.

There is more focus than ever on disclosure of property damage, flooding, burn risk, etc., in these areas, and buyers are suspicious. What flood zone or natural hazard risk area a home is located in matters more than ever.

The cost of insurance has already started to rise in some of these locales and not every property may be able to get insurance after two or more consecutive incidents.

Buyers and sellers may elect to delay real estate activities during hurricane season due to the tremendous amount of uncertainty that these storms endure.

During a recent property showing, standing water in a wooded area after some rains a few days before raised serious concern with my customer who surmised that the entire property must have flooded during Hurricane Irma.

Although it did not, buyers are assuming the worst case scenario before getting all of the facts.

The full effect of natural disasters that have transpired thus far has not been felt as of yet. Insurance rates, the cost to rebuild and these disasters’ effect on property values are issues to watch in 2018.

Buyers may choose to live in coastal areas but maybe not as close to the water as they previously felt comfortable doing.

Areas that flooded are going to be a tough sell for any prospective buyer who believes that lightening can strike twice and often does. They don’t want to wait for the second coming of whatever happened in that area before.

Resales reinvented

For many resale homes to compete with brand- or like-new inventory in many markets, substantially renovating to sell will become the standard and not the exception.

The bar has been raised even higher for resale homes to offer “model home like quality” on both the inside and outside.

Buyers don’t want to pay top dollar for homes that have not been kept up, that have lipstick-on-a-pig renovations or that have outdated floor plans — unless they are a bargain.

Micro markets

Real estate will continue to be defined by micro markets. Every street and subdivision is different. Even two neighborhoods with similar homes a few miles apart from each other may tell quite a different story when it comes to market activity and sales statistics.

To really understand the market dynamics, buyers and sellers need to focus on what’s transpired in their backyard and price accordingly.

With so many market dynamics at play, 2018 is sure to be an interesting and revolutionary year in real estate on many fronts. Sit back, relax, and enjoy the wild and crazy ride!

Cara Ameer is a broker associate and Realtor with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Florida. You can follow her on Facebook or Twitter.

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