Last month I wrote about what we can expect real estate to do this year from an economic position. Since then, we have more data to review.
Noted in the Wall Street Journal this past week; the Commerce Department announced the USA economy grew at a 2.6% rate in the fourth quarter of 2017, with an annual growth rate of 2.3% of which the second and third quarter registered above 3%. Consumer spending rose 3.8% and business investment climbed 6.8%. The economy hasn’t grown this fast since 2005. Expectation for a 4% rate during 2018 is common discussion among many economists.
The Tax Reform Act appears to have taken hold. 263 major US companies (so far) have committed to new capital spending, $200 million dollars in wage increases, and $1.5 billion dollars in additional employee pension contribution. Business growth drives job growth; low unemployment will force companies to compete for employees which means higher wages, and we will probably see more employment opportunities for individual household’s as well.
So what does this mean for real estate in the Sioux Empire? It has been my contention over the past four or five years, that household income was not only stagnant, but cash flow was down even more due to the extra cost of living and healthcare. This put most move-up home buyers on hold. There simply was not additional cash available at the end of the month to afford a higher monthly payment. This stifled the $300,000 to $600,000 market.
Starting in February, paychecks will be bigger because there will be less tax withholding, and hopefully increases in wages as well. In addition to the physical financial prospects, consumer confidence is high. On the streets, we are having more conversations with move-up buyers than any time since the housing crash of 2007.
The result of all of this will most likely increase home sales, prices will increase, more new homes built, and offer the upper-middle bracket home-sellers an opportunity to sell at a reasonable price and within a respectable time frame. 2018 will be a very good year for both sellers and buyers. 2019 may be even better.
Mortgage rates are trying to push up, but with resistance. The rates are now 4% to 4.25% for a 30 year loan. These rates ought to hold tight for a few more months; although, they will most likely be higher at the end of the year. There is still plenty of time for buyers to take advantage of historic buying power.
History is laced with factual data. Real Estate Investment in every category is looking as promising as anytime experienced over the past 40 years.
Wishing you a spectacular 2018!
We invite you to call or text 605.359.4100
Tony Ratchford. Broker, CRS, SRES, ABR, co-owner Keller Williams Realty Sioux Falls