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Profit by Knowing the Housing Market Conditions Forecast for 2018

Gary Tole

The OTA Real Estate program is growing by leaps and bounds across the country!  We are all anticipating 2018 to be a record year. Your OTA Real Estate instructors are ready to review your deals live every Thursday evening in the online Real Estate Coaching Center “RECC”.   There is more good news for OTA Real Estate investors, we are not limited to just our local market areas.  We offer the very best tools to search for the most profitable deals across the country.

The topics we will cover in this month’s newsletter:

  • National Housing Forecast Summary
  • Key Housing Indicators
  • Where the Majority of Inventory Will Come From
  • The First Cities to see Recovery
  • What Slowing Price Appreciation Means
  • Tax Reform Will Affect All Real Estate Investors
  • Millennials Have Taken the Lead

2018 National Housing Forecast

Inventory shortages of 2017 are expected to ease as we see an increased inventory nationally.  The increases are expected due to more manageable home prices which began during the summer of 2017.  Most industry experts see increases in millennial mortgages and strong sales growth in Southern markets. Southern cities are anticipated to beat the national average in home sales growth in 2018.  ‘There are clear winners and losers,’ said Adam Kamins, senior economist at Moody’s Analytics, ‘States in the Northeast and along the coasts are hit pretty hard, and states in the South and Mountain West come out ahead.’ 

Sales in the Southern markets are expected to grow by 6% or more as compared with 2.5% nationally; 5.6 Million home sales as compared to 5.47 million recorded in 2017.  Overall, home ownership will continue to increase this year.

An overview of expectations for the 2018 housing market.

The Southern Cities Leading the Way in 2018 Are:

  • Tulsa, OK – 7.5%
  • Little Rock, AR – 7.0%
  • Charlotte. N.C. – 6.0%
  • Dallas, TX – 6.0%
  • Columbia, S.C.- 5.1%
  • Deltona-Daytona Beach, FL – 5.5%

Much of the growth can be attributed to increasing building levels that will reverse the past housing shortages. With inventory growth just around the corner, these areas are primed for sales gains for years to come.  Both trends, when combined, equal stronger sales and more inventory.   Both clues also direct us to where we should be looking to invest!  Finding the best deals in HOT markets is one of the best indicators of future success for property investors.  As price appreciation slows in some areas it will increase the need for properties at competitive market prices.

Millennials Are Driving the Housing Market

Bear in mind that Millennials are the driving force in today’s housing market. They already dominate lower price home mortgages and are getting close to overtaking older generations for mid-level and upper tier mortgages.

While financially secure in general, their debt to income ratios have started to increase as they compete for higher priced homes.  Home price appreciation is estimated to be 3.2%.  This alone indicates a sales pickup across the country.  Along with home price appreciation slowing, interest rates are expected to average 4.0 to 4.6 percent for most of the year and may increase to 5% on a 30 Year Fixed rate mortgage by the end of the year.

Another factor to consider will be existing home sales.  At 2.5% growth, markets starved for inventory can finally expect an increase in the number of properties available for sale.

Housing Starts are expected to grow at a 3% rate, while growth in single family home starts will be over double that number at 7% this year.  More people purchasing, or leasing homes will generate greater opportunities for OTA property investors in moving their inventory.

Wholesale deals should be strong this year, too.  Our Deal Board and Deal Tracker are where we have the best tools to analyze the profitable properties from the unprofitable.  Home ownership rates are expected to stabilize at 63.9% in the 3rd quarter of 2018 after recording a bottom low in Q2-2016.

Rounding out the numbers for property investing this year, the majority of inventory growth will be priced at $350,000 on average.  This is valuable information that can lead us to profitable returns.  Remember, we must always Inspect what we Expect before we make any investment purchase.

Mastery of the Deal Board and Deal Tracker are essential to your success in all investment asset classes.  Keep in mind, as an OTA Real Estate student, you have the opportunity to discuss current market trends, your deals and many other important topics every Thursday in the Real Estate Coaching Center (RECC) at 6:00PM CDT.  The RECC is your place to stay informed and current.  RECC sessions are presented by your Real Estate Instructors, our Director, Diana Hill, and many amazing guests.

Where will growth in the housing market occur for 2018?

Cities worth investigating and to have on your watch list are those that were hit the hardest economically that are expected to experience a rebound this year. 

First Cities to See Signs of Recovery

  • Boston, MA
  • Detroit, MI
  • Kanas City, MO
  • Nashville, TN
  • Philadelphia, PA

According to Inman News, ‘Home owners have taken some knocks, but not as many as they could have.  However, investors, companies and commercial real estate stand to gain.’  These trends all point in the real estate investor’s favor.

Alternative markets to find potential purchasers come from foreign buyers, according to a report in the The Real Estate Center at Texas A&M University Journal.  Foreign investors have already proven to be viable prospects worth finding.  Learning how to market to this group will certainly direct us to a proven client base eager to buy.

Free Real Estate Investing WorkshopAreas with the Most Foreign-Held Land Are: 

  1. Maine – 2,969,659 Acres
  2. Texas – 2,925,977 Acres
  3. Alabama – 1,552,837 Acres
  4. Washington – 1,402,600 Acres
  5. Florida – 1,80,856 Acres

Tax Reform Highlights

**President Trump’s Tax Bill, the largest in 30 years, will benefit all Americans, not just the billionaires like the President. And yes, that includes tax benefits for us property investors.

Our country could see a 4% rise in GDP growth in 2018.  Investors should be aware that the Real Estate Investment Trusts (REIT) laws were structured to benefit all Americans, providing them a vehicle to invest in high quality real estate that produces durable sources of dividend income.  REIT dividends could be worth 20% more this year, making this investment strategy even more appealing for the real estate investor.  Additionally, commercial real estate investors will retain the 97-year-old 1031 exchange law, paving the way to greater profits.

3 Ways Tax Reform Will Affect Home Values for Property Investors 

  1. Lower mortgage interest deductions will reduce the high-end amount that can be deducted to $750,000 max – down from $1 Million. That will make it costly for buyers of expensive homes to borrow.
  2. The property tax cap for home owners is now at 10% for state and local property taxes, plus income or sales tax that filers can deduct this year. The new tax laws improve the case for investing in properties in the lower and middle price range, which will be in greater demand this year.
  3. Home loans could get more expensive. Mortgage rates have been sitting around 4% since mid-July 2017, which has helped offset the rise in home prices.  As interest rates rise higher, borrowing becomes more expensive, putting high-cost homes out of reach for many buyers.  These individuals and families could become our future renters, or wholesale and fix & flip purchasers.

The Millennials are Already Here

  • Mortgage market share gains in all price points.
  • 40% of all Mortgage Originations were made by Millennials in 2017 vs 43% projected mortgage originations in 2018.
  • Roughly 10,000 millennials turn 21 every day in America, making Millennials the largest generation now. And just like the Baby Boomer generation, birth years 1946 to 1964, changed how the world did everything, millennials will do the same. This is especially true in how we live and work.  In 2018, Millennials will have the most spending power of any previous generation.

48% of Millennials say word-of-mouth strongly influences their product purchases much more than TV ads.  Only 17% said that a TV ad prompted them to buy.  This is due to their strong use of social media.  63% stay updated on brands through social media. Having a social media presence can increase your influence with this powerhouse generation.

How are millennials impacting the housing market?

Millennials are now the most educated generation in American history, with over 63% of Millennials having a Bachelor’s Degree.  50% of Millennial college students say they don’t need a physical classroom.  39% view the future of education as being more virtual.  90% of Millennials surveyed think being an entrepreneur means having a certain mindset rather than starting a company.  However, 54% either want to start a business or already have started one.  This translates to a new and growing group of current potential home buyers wishing to become property investors.

By 2025, 3 out of every 4 workers globally will be Millennials.  There are roughly 40 million Millennials in the workplace today.  In a recent study, 45% of Millennials will choose workplace flexibility over pay and a full 56% of them will not accept jobs from companies that ban social media access.  Again, another good reason to create an online business presence to deliver your message to Millennials.

On the other end of the spectrum are the Baby Boomers that will be retiring and leaving the workplace. Approximately 63.3% of corporate executives will be eligible to retire in the next 5 years.  The opportunities for Millennials to advance in all areas are endless.  In the year 2020, the largest Millennial population will be 30 years old and will continue to increase their presence by market share.

Make plans now to be ready to custom tailor your investment properties to meet the growing needs of this gigantic growth segment of the real estate market.  The real estate education and training you receive at OTA Real Estate Academy is priceless, in my opinion.  Stay plugged in for the greatest results.

MILLENNIALS will change the world in ways NO OTHER GENERATION ever has!

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.