10 Real Estate Trends to Watch in 2018. (Part 1)

2018 is here, welcomed with new hopes, optimism, and expectations. And that includes the real estate market, as homeowners, sellers, and buyers alike all have important questions about what the next 365 days will hold.

For the third year in a row now, we've combed the best research by economists, analysts, and experts and summarized it for you with these ten real estate market trends to watch in 2018.

Are you thinking about selling your home and moving up to your dream home in 2018? Finally investing in rental properties? Or maybe selling and downsizing? You'll definitely want to read about these trends so you can make the best, well-informed decision.

10 real estate trends to watch in 2018:

1. Homeownership rises from the ashes

Despite great interest rates and rampant supply, homeownership rates remained dismal in 2017. In fact, with only 62.9% of American adults owning a home as opposed to renting, January 2017 was the worst in almost thirty years. But we saw progress by the close of 2017, with the ownership rate rising to nearly 64%.

2018 will continue that trend of improving homeownership rates, thanks to easing lending standards, favorable interest rates hanging around, and the increased demand from Millennials that want to own a home en masse.

2. Interest rates don’t disappoint

In their December 2017 meeting, the Federal Reserve nudged their short-term lending rate from 1.25% to 1.5%. Typically, we see that ripple out over mortgage rates, too, but economists are pleased to report that interest rates for buyers and refinancers should only increase slightly this year. In fact, most experts are looking at interest rates between 4% and 4.5% this year, which is a tick higher than 2017 but still GREAT if you look at it through a historical lens.

Just as important, banks will continue to ease lending standards and loosen their guidelines as the economy bustles, making homeownership a reality and more affordable for tens of millions of Americans. 2018 will be a great year to buy!

3. Another demographic joins Millennials

We talked about young buyers a lot in 2017, as Millennials were right on the cusp and then exploded into home ownership. In fact, the older Millennial (Gen Y) age bracket makes up about 34% of all home buyers now, and nearly two-thirds of all first-time home buyers! That trend will continue in 2018, with one notable addition: Gen Z.

Born between 1995 and 2001, Gen Z'ers will be graduating college, entering the workforce, moving to cities (their preference), and either renting or, eventually, looking to buy. Their numbers are not insignificant, adding tens of millions of new consumers to the housing market mix over the next year and beyond.

4. While Boomers try to figure it out

On the other end of the demographic range, Baby Boomers will have a huge impact on real estate markets across the country, both because of their sheer numbers and because they face several different and profound challenges. Called the “Silver Tsunami,” over the next 12 years, 75.5 million Americans will be over the age of 65.

A smaller portion will have plenty of funds for retirement and will look to move to higher-end senior communities and other arrangements.

But the majority will struggle, as less than 37% of Boomers have $50,000 in savings – and that's not banking on a diminished post-retirement income and increased medical costs.

Therefore, smart Boomers will explore their options now, and selling an existing bigger home to downsize (and walk away with a sizable profit) is one attractive option in 2018.

5. Metro markets stay hot

Major cities saw huge housing price jumps in 2017, with many western states leading the list. Those will continue n 2018, at nearly the same pace. In fact, analysts look at Seattle as the #1 market to watch for home price appreciation in 2018, followed by Austin, Texas (2), Dallas (4), Boston (10), Miami (11), Atlanta (17), etc.

California markets like Los Angeles (7), San Jose (8), and Oakland (20) continue their torrid pace, as do secondary markets like Sacramento (see below).

But in 2018, look for many southern communities (Nashville, Raleigh/Durham, Charlotte, Charleston, Orlando, Tampa/St. Petersburg, etc.) will shine like never before. 

6. But secondary markets absolutely sizzle!

The rising cost of housing in America's most-desired cities may not be breaking news, but the positively explosive growth of secondary markets is of note. In fact, "second cities" and secondary markets performed extremely well in 2017 for sellers and homeowners, and we expected to see more of the same over the next 365 days.

According to a survey of the “best cities for finding houses for sale and get a great return,” Sacramento ranks #9 in the entire nation with NorCal communities in general representing exceedingly well.

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Look for part two of this blog coming very soon, as we cover 2018’s trends of inventory, technology, tax consequences, and the overall health of the housing market!