The following is David Hoffman’s forecast for the 2018 economy, and how it looks to effect real estate.
From December 2017:
As you all know, real estate is micro-economics, meaning each area will shift at different times. Plus, as the market slows, it benefits buyers, so sellers should move soon, and buyers should be ready. This is across many markets.
With that being said, housing prices will drop by four percent, with home prices over $750,000 in msa’s with median home prices of $250,000 and under decreasing by 11 percent, while homes priced under $250,000 will remain flat overall. Again, this is speaking from a macro-economics perspective.
Second home markets, such as the beach and mountains, where the local economy is led by tourism will fall 12 percent.
The stock market will finish 2018 23 percent lower than it will start tomorrow; leading to a shift in investments to bonds, with many already moving to cash and money markets. As stock prices begin to fall, more and more people will sell off; hurting prices even more, and leading to bonds being more attractive, especially as the Fed increases the rate. This will also lead a mortgage rate that will reach 4.75 percent on 30-year fixed by the end of the Summer.
Inflation will climb to 2.5 percent; helping companies with pricing, yet hurting consumers with less disposable income, and not helping companies enough to make up for the mass exodus from investing in stocks and mutual funds. Silver and gold will also fall, as will Bitcoin.
Rental properties will flourish, as rental rates climb more and more, as a percentage of home buyers move to the sidelines for the next 1.5-2 years.
You can expect consumers to start pulling back on luxury technology purchases, such as new iPhones, new Tesla’s, etc., by the end of the Spring, and this will last for 14-17 months. More will rent/lease these luxury commodities.
People will drive more, and fly less: leading to a rise in oil prices, and a decrease in suv and truck purchases. Hybrids and efficient cars will be the smartest purchase.
More and more Americans will keep cash on the sidelines, and start buying back stocks towards the end of the year.
Investing in developments with long-term commercial leases of reputable companies will become more popular, as will renewable energy credits, in order to cut taxes, while being environmentally sound.
$2m in retirement is the new minimum for someone at 65. We are also going to see more and more people sell off real estate, as baby boomers sell at the fastest clip ever, compared to millennial, who rent until later than any other generation before them. This influx of supply will hurt home pricing later this Spring and Summer.
Last but not least, Europe is going to move their money back to Canada by mid-year after a year off. The US media will start picking up signs of a recession by the end of the winter, leading to consumers getting frightened and consumer confidence dropping even further.