Overall, the 2018 real estate market looks positive. Both on a national level and a local New Jersey level, we expect this to be a healthy year for buyers and sellers alike. While we don’t have a crystal ball, we’ve outlined a few of our predictions and expectations for this year.
- Under the new tax reform bill, interest on Home Equity lines of credit (HELOC’s) may NO LONGER BE DEDUCTIBLE. It MAY make sense for you to consider rolling your HELOC into a new ‘first’ mortgage to maintain that deduction. PLEASE verify with your accountant or CPA if you feel this may be something you need to address.
- I have seen a rash of clients refinancing with their existing servicer with the promise of a free appraisal, reduced fees, etc. In many cases these come with higher rates or APR’s; in almost EVERY case Cornerstone can offer the same while maintaining the high level of service that you are accustomed to. PLEASE let me know if I can help!
- Along the same lines…. Another regional ‘NJ’ based bank is offering to cover some closing expenses for ‘one low fee’. Upon closer reflection this will require a higher rate and APR, and the borrower is FORCED to use a SPECIFIC title provider who (I assume) is offering discounted title fees. Cornerstone can ALWAYS offer the same options on both counts but would encourage anyone considering this be aware of the long term (additional) interest expense involved.
Rates will Rise
According to data from Wells Fargo, the average 30-year fixed mortgage rate is 4.0%. We expect that rate will increase throughout 2018, but not drastically. With the US Economy continuing to improve and the Fed looking to keep inflation in check, we expect rates will rise to 4.25% or possibly 4.45%.
New Tax Bill and Second Home Properties
The new tax reform bill, which is in effect for 2018, limits state and local mortgage deductions to $10,000. This will affect people who have relied heavily on mortgage tax deductions for second homes in the past. This could translate to owners with second homes deciding to sell those properties, such as beach homes. This, in turn, could mean more affordable pricing due to higher inventory in these types of markets.
Banks Pursue Mortgage Loans
In recent years, banks have been very careful with mortgage lending, but we are seeing that ease. More options translate to more competition for banks, and we are seeing them act more aggressively in order to secure mortgage loans. This is particularly helpful for Financial Institutions like Cornerstone Capital because we can pass those options and competitive rates on to you with a bigger impact to your bottom line due to our buying power.
Millennials Start Buying
The trend for college graduates to move back home has been increasing in recent years, specifically the younger Millennial generation. Now, with a stronger job market, we are seeing those now 20-somethings saving up and ready to move out of their parent’s basements. With this new influx of buyers, we will see lower priced property in higher demand, which in turns make the entire market healthier.
All in all, we don’t see dramatic changes in the market this year, but we do see many positives. If you are considering selling or buying, 2018 just might be the right time to do it. At Cornerstone Capital Financial Services, our mission is to inform, advise and teach. Let us help you understand the market, your specific financial situation and how those two factors combine to determine your personal real estate market.