As we look back at the Tallahassee real estate market in 2017 we can see several trends that will impact the market in 2018. There are several major factors that will influence 2018 from mortgage interest rates, inventory of homes available, federal tax changes and various home buying motivations. Understanding these trends and how to take advantage of market conditions could provide significant leverage to those considering buying and selling real estate this year.
Impact of mortgage interest rates. During 2017, the 52 week average for 30-year fixed mortgages was 4.14 percent (according to Bankrate.com). In a recent study by the Mortgage Bankers Association, lenders continued to see an increase in mortgage applications even with the moderate increase of interest rates. A moderate increase in interest rates is a trend that can influence potential homebuyers to act in order to realize a .25 percent cost savings in interest over the life of their loan. Current homeowners considering whether or not to sell in 2018 should take advantage of this financial market condition while buyers are motivated by mortgage rate increases.
Low supply of inventory of homes for sale. In 2017, the Tallahassee real estate inventory saw a significantly lower amount of homes available for purchase compared to inventory levels in the previous 12 months. One factor that contributed to low inventory levels was due to baby boomers deciding to stay in place and remodel their homes to enjoy the luxuries and upgrades found in newer homes. As a result, fewer entry level or starter homes were placed on the market compared to previous years. If you are considering selling your home……NOW is the time to get it on the market. With the current conditions you will get a higher value than you would have compared to 12 months ago.
Millenials entering the market. As a domino effect, due to the lack of entry-level priced homes millennials are coming into the real estate market to purchase and are experiencing firsthand the inventory shortage and homes they have to choose from. As a result, they often have to make multiple offers to get the property they want or even offer above list price in some cases. Current homeowners with 1,500 to 1,800 square foot homes should consider selling now in order to take advantage of the high demand and low supply of these homes.
Increase in rental properties. A second trend in 2017 that impacted low inventory levels was the result of investors purchasing foreclosed and short sale homes in 2016 and turning them into rental properties. The vacuum of these homes being taken off the market reduced the inventory compared to previous years. As a result, home price ranges such as $100,000 to $200,000 and $250,000 to $350,000 are moving very quickly. Homes in these price ranges, if priced right and in good condition, are experiencing multiple offers and some over list price. Homeowners considering selling in 2018 can take advantage of these bidding wars to reach maximum value for their home.
New home construction costs. New construction is up, not only in sales but also pricing. While we are seeing an increase in growth particular in the Northeast sector and east of town plus the Southwood area, the cost to build a new homes has increased significantly due to 2017 hurricane damages impacting construction materials and labor costs which is passed down to potential new home buyers. In addition, the lack of availability of affordable lots to purchase for the new construction builders has also created an increase in new home building costs. Homeowners who have invested in renovations and upgrades in older homes can take advantage of the higher costs and prices of new home construction and realize a positive return on their investment.
Federal property tax deduction changes. As a result of changes in the 2018 federal tax laws, mortgage interest deduction thresholds have been lowered from $1 million to $750,000 on new property acquisition debt. In addition, residential property tax deductions are now capped at $10,000. The tax deduction for interest on existing or new home equity loans has been eliminated. Homeowners with homes valued in the $750,000 plus price range must take these factors into consideration when pricing their homes to sell. Homeowners who have not made upgrades or renovations, but who were considering taking out a home equity line of credit for renovations might consider selling now to take advantage of low inventory.
If you have questions about how you can take advantage of these market conditions and would like to learn more about how to maximize the return on your real estate investment, I strongly encourage you to reach out to a licensed real estate professional. For more than 23 years I have helped hundreds of buyer and sellers experience a pleasurable and stress-free real estate transaction experience. Let me put my knowledge, experience and network of industry contacts to work for you.
Mike Ferrie
PrimeSouth Properties, Inc.
Mike@Mikeferrie.com
