What is the 2018 Outlook for mortgages and how will it affect my real estate business?
Below, I will share with you the new tax law, new loan limits, housing outlook and projected interest rates for the new year. Also, I have some links to must have mobile apps that will make your job easier and assist your client with the home purchase process. Call me about co-branding these for your business branding and marketing.
1. Income Tax Reform.
a. The recent approved and signed tax law is now a reality and may have an effect on some of your new buyers. I say new because the law does not affect mortgage loans made previously to 2018. The mortgage interest deduction has been reduced from $1 million to $750,000. This will not affect to many of us as less than 2% of all mortgages nationwide exceed the new limit. Further, they will still have the deduction up to $750,000. So, if they put on a new $1 million purchase money loan they would be able to deduct all interest paid to the $750,000 amount but none of the interest on the remaining $250,000 balance.
b. Capital Gains on your primary residence remains the same for the occupancy period and amounts.
c. Interest paid on Home Equity lines are no longer deductible unless they are purchase money debt and collectively less than the $750,000 limit.
d. Local and State Taxes such as property tax deductions are capped at $10,000 for the year.
2. Loan Limits for 2018
a. Conforming Loan have increased $29,000 from $424,100 to $453,100 for a one-unit residence. For a 2-4 unit residence, the loan amounts are much higher.
b. Conforming High balance above the $453,100 amount was increased for high-cost counties to $679,650, but for Santa Barbara County it remains the same at $624,500.
c. For FHA loans the limit is $653,200 for Santa Barbara County.
d. For reverse mortgages for either refinance or purchase the FHA limit is $679,650.
3. Outlook for Housing
a. Inventory remains low as household formation far exceeds home production.
b. Rents will rise 4% per year.
c. Home appreciation over the past 50-year period has averaged 5% annually and the most recent Case Shiller HPI is up 6.2%.
d. Our prediction for home appreciation is 4.5% to 5.5%.
4. Outlook for Rates
a. Federal Reserve will have a new Chairman as Yellen is replaced with Jerome Powell. Trump will be appointing 4 new Federal Reserve Governors during 2018. The Fed will also have 1-2 more rate hikes during 2018. Further, the Fed will be beginning its Quantitative Tightening this January and into 2018 with MBS purchasing down from $25 Billion per month to just $5 Billion per month by October.
b. US Treasury Yield curve is flattening and may signal a stock market pull back.
c. During the 2018 year expect mortgage rates to increase .375% from current levels.
5. Reverse Mortgages
a. Good opportunity for seniors to downsize and keep a majority of their sale proceeds liquid.
b. Easy to qualify for and flexible monthly repayment options.
c. Increased loan limits to $679,650.
6. Links to mobile apps.
a. BuyerZapp; https://www.buyerzapp.com/AppDownload/David_8057058336
c. See these and more tools on our new web site: www.RELoans.com