By Mark Hite
President, Greater Chattanooga REALTORS®
While many of the topics in this space over the last 12 months have used past sales and statistics to provide insights and information, today we will take a moment to look into 2018 and share some of my personal predictions.
Home sales in the Greater Chattanooga region will continue along a positive path in 2018. As a result of the tight supply of homes available for sale, the increase will be modest, but sales will continue at the record levels we have been experiencing in 2017. The overall economic outlook is positive, and unemployment remains low locally and nationally, so buyer confidence will continue into the new year.
As a result of the continued positive sales trend and tight inventory levels, home prices will continue to move upward. While interest rates will slowly move into the mid 4% range, these low rates will keep affordability in check and well below the pre-recession boom. National real estate experts tend to concur that buyers will stay in the market until rates reach the 6% range.
The inventory of available home choices will remain tight in 2018 for 2 reasons. The number of new home starts, while increasing in 2017 will continue to fall well below demand. There are simply not enough building lots available and labor to build homes to match the demand in our region or across the country. Many current home owners who are candidates to upsize or downsize will stay in place as they do not see acceptable options for the next phase in their lives. With no compelling motivation, their homes will stay off the market and continue to reinforce the tight supply chain.
There are several factors which will affect the housing market, but the impact and timing will vary. The recently passed "Tax cut and jobs act" will eliminate the mortgage interest deduction for many residents as they elect to take the enhanced standard deduction instead. This loss of value combined with the loss property tax deductions will reduce the appeal of home ownership vs. renting. The resulting negative impact on home values is yet to be seen. A second looming change involves the long-discussed reform of Freddie Mac and Fannie Mae, the government-sponsored entities, which along with FHA are the primary source of lending for Americans across the country. Any significant impact on affordability will surely derail the positive predictions outlined earlier.
It has been a pleasure sharing this space with you over the last 51 weeks and again I encourage you to engage a professional member of the Greater Chattanooga Realtors as you approach any real estate decision.