Cash-In on Low Inventories: Selling Your Home in 2018

Looking back on 2017, it was a wonderful year for the seller’s market. In fact, CNBC declared it as the “strongest seller’s marketĀ ever” due to the continuous rise of prices in the housing market. Not only that, but the National Association of Realtors proclaimed that the national median sales price for existing homes exceeded 5.6% over the course of one year. These numbers are expected to climb even higher in 2018, as the demand for homes continues to increase, but the supply isn’t climbing at the same rate. As such, many economic analysts and real estate experts are acknowledging 2018 as the “Year of the Seller.”

To put this in perspective, let’s examine what low inventory means for buyer’s and sellers, influential factors of the market, and why 2018 is the year to sell your home for what it isĀ truly worth.

Low Inventory Once Again

Much like 2017, the low inventory of homes is expected to remain at a historical low and be the primary hurdle for buyers over this next year. Svenja Gudell, a chief economist with Zillow expounds, “Builders have been ramping up somewhat over the past year and that should continue going forward. But in order to satisfy demand from entry-level buyers in particular, builders will need to find more affordable sites farther from job centers—and it’s unclear if buyers will be willing to sacrifice their commutes for affordable homes as they did in the past. And in general, it will take many years of above-average building activity to help erase the housing deficit we’ve created after years of under-building.”

However, despite our under-building over the past decade, building developments are continuing to grow. In fact, housing starts are estimated to rise 2.2% to a whopping 1.3 million units. Even though supply is low and demand is high, experts are projecting that with the increased number of housing starts in 2018 will come an eventual increase in property sales and balancing of supply and demand.

The Chicken and the Egg Dilemma

Matthew Gardner, chief economist at Windermere Real Estate, insists that the relationship between buyers and sellers persists as a kind of “chicken and egg” situation wherein, “…would-be sellers know that they will likely have no problem selling their existing home, but they will not list until they have found somewhere to buy, and if they can’t find somewhere to buy, they won’t list.” This could inherently prove to be the bane of the housing market in 2018, but nothing is certain and there is always room for growth and change.

Considering Gardner’s statement, this fear of “not selling” will drive homeowners into a sort of seller’s limbo where nothing will happen. Extant homeowners are most certainly the greatest source of inventory, but when the all-around availability of affordable housing is lower than ever, we may not see much movement in the market until seller’s regain their confidence. If we propose to project further on these notions, we can gather that this confidence will not be gained until more housing units enter the market and sellers have a cushion of homes to fall back on once they sell their existing houses.

The Affordability Scare

Recent developments within the realm of increased mortgage rates and tax reform legislation are proving to be the ultimate “scare factor” for buyers and sellers in 2018.

Even though mortgage rates are only expected to climb to around 4%, this steady climb in mortgage rates may end up being quite the obstacle for prospective homeowners when it comes to getting a home loan. As such, financing a home is going to become much more difficult, and many citizens may find themselves caught in a renting loop for the majority of the year. This, of course, primarily applies to those who are looking for housing in high-price and high-tax areas such as New Jersey, California, and New York.

As for the tax reform, the recent tax laws that have been passed restrict residents from deducting state and local taxes from federal returns for up to $10,000. Steve Cook, a real estate communication consultant at commsconsulting.com stated, “Should the deduction become meaningless to middle and upper-middle-class owners, a significant incentive for homeownership will disappear. Homes will lost about 10 percent of their value over time due to decreased affordability for buyers.”

Is 2018 Really the “Year to Sell?”

When it comes to actually pulling the trigger on selling your home and relocating, it is probably a smart move to refrain from doing so until later in the year when more of the “kinks” have been worked out. So, if you are wanting to sell your house, I would recommend that you research the housing market in your local area incessantly before making any big moves. Watch the inventory, keep tabs on the rise and fall of sales prices, and develop a deep understanding of the market. That way when the time comes, you will be fully equipped to make the right moves at the right time without dire consequences.

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