Experience You Can Trust

2018 Real Estate Predictions from Kevin Budde at BofA

2018 Real Estate Predictions from Kevin Budde at BofA

2018 Realtor

2018 Real Estate

California Specific – 2018 real estate

In 2018 the California housing market is going to be much better than some may have thought in 2017. This month begins my 43rd year in the mortgage industry and while I may not be an economist I have experienced many ups and downs over the years. Since 1975 I have been through 3 major housing downturns (1980-1981, 1990-1994, 2007-2011) and I want to point out the most significant factors creating another good year for the California housing market.

 

Housing Markets Turn Down In Bad Economies, Not Good Ones

We are going to have a strong economic year in California in 2018. California is having robust job gains and the unemployment rate is at the lowest level in 4 decades, 1979 being the last time it was this low – 4.6%. Since 2012 the California economy has grown faster than that of the US as a whole. Job gains are happening across most industries. Technology, Educational and Health Services, Leisure, Hospitality, Business Services, Manufacturing and Construction. All industries are showing gains in employment. With a tight labor market employees feel their jobs are secure and the possibility of pay increases. They also consume more goods, services and homes which in turn creates more jobs.

 

The New Tax Bill – Don’t Fear It

The corporate tax cut to 21% is now in place along with lower individual tax rates and higher child care credits. Business owners and corporate executives make up a large portion of the high-end California home buyers. They will see increases in corporate profits allowing for increased bonuses and more profit distribution to the bottom line. Increased corporate profits will drive the stock market higher creating a larger net worth.  As individual’s retirement plans and 401ks increase, the wealth effect increases and homebuyers feel better and are more secure taking the step towards the purchase of a home.

 

The new lower mortgage interest deduction cap from $1 Million to $750,000 is not going to have a lasting affect going into the New Year. The change will cost a homeowner with a mortgage over $750,000 an average of $2,500 to $4,000 a year depending on their tax bracket. That amount would be equal to a 6% increase in monthly principal and interest payments. The wealth effect created in the other areas of the tax bill are going to offset this increase.

 

There Are Headwinds

The two biggest challenges are the Federal Reserve Board may increase interest rates in 2018 and the Tax bill limiting property tax and state income tax write offs to $10,000. When interest rates are perceived as going to increase it does move some people to proceed with a purchase to take advantage while rates are still low. California does have the highest tax rate in the nation. With mid-term elections coming in November there is a chance we see change in this area where it’s needed the most.

 

In Summary

These views are strictly my opinion. California housing has always done well when the economy is in good condition and employment is strong and 2018 is showing evidence of both this year.

 

If I can help you in any way this year please let me know, Kevin

I have known Kevin for years and he can be reached at 949-422-2075

Ron Buck, associate broker at Keller Williams RE bre#01364665

949-456-0505 or RonBuckGroup@gmail.com  RonBuckGroup.com

 

 

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