Predicting 2018

Usually, predicting the coming year’s real estate market is not very challenging, as real estate tends to move slowly and the beginnings of trends are pretty easy to spot if you know what to look for and you have a little experience. This year, I have to admit to being a little less certain of what we will see in 2018. There are things I expect to happen that I know will affect the market, things I expect to happen but I don’t know if they will affect the market, and then things that I have no way of knowing will happen or not.

First of all, the Fed has telegraphed multiple rate hikes and a continuation/expansion of Quantitative Tightening. The rising interest rates will continue to stifle the move-up market, making it harder for people to afford a larger home. QT may pull investment dollars out of the stock market and cause a bit of a drop there, which could affect the amount of money people have for a down payment. I think that the combination will lead to a reduction in the number of home sales, but will not affect the price much as the two actions offset each other.

I expect that we will see a new tax law (it hasn’t been passed at this writing), but until it becomes law, it’s hard to know what will actually be in it – although since both the federal and state governments continue to increase the benefits they try to provide, they also need to increase revenue – and homeowners seem to be in the target sites right now.

Other things that could have an effect one way or another are: Brexit and potential further fragmenting of the European Union, an escalation with North Korea or in the Middle East, Broadcom’s hostile bid for Qualcomm, and an unraveling of the current administration. Any of these are possible and none would appear to be good for local real estate, but they wouldn’t necessarily be significantly negative. The biggest issue I see coming is the pension situation and how that affects taxation down the road, but I don’t think we will deal with that in California for at least another five years.

So, I think what we will see in 2018 is another 6-10% appreciation with 5-10% fewer transactions. Rents will rise also and we are likely to start hearing more about rent control. I will continue working with my investor clients to transfer their real estate investments out of state for better returns.

rew_voakpacificlogoScott Voak, MBA – Broker

Managing Partner
CalBRE #: 01436430

16710 Bernardo Center Dr., San Diego, CA 92128

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