Posted by Shannon Register

Although home ownership rates were down in 2016, we are seeing 2018 kickoff with a promising housing market. Low oil and gas prices are driving our US economy. We are seeing home sales in Texas turn over at a good pace right now. Existing home prices are up three and a half percent. New home sales across the state are up two. In 2017 residential building permits were down and new construction costs were rising due to a lack of skilled labor, increases in lumber cost, and increases in concrete cost. That cost gets passed onto buyers who purchase those new construction homes.

Inventory dropped over the last year. We are still seeing housing shortages in some areas of Texas with limited new construction.

Median home prices are up in all four major markets, but incomes are not keeping pace, plus moving costs are increasing. Have you heard about the Tax Cuts and Job Act that was passed by congress and signed into law by President Trump? There were many provisions that impact real estate. The new law repeals the moving expense deduction, unless you’re in the armed forces. Capital gains will remain the same on the sale of a principle residence and you can still deduct your medical and student loan interest. Additionally, there’s a cap on the mortgage interest deduction.

Home equity loans won’t be able to be deducted in 2018 unless the funds were used to improve the residence. Then there’s the state and local property tax deduction cap. Now, there were some upsides to the law, including a more simplified tax structure and doubling of the standard deduction. We’ll continue to have 1031 or like kind exchanges in real estate.

Looks like interest rates are heading north. Interest rates are at high levels this year at 4.5% on a 30 year mortgage, but that’s still not a bad deal when purchasing the American dream of homeownership.

If your New Year’s resolution was to purchase a home, make sure you’re on the right track with credit and income. In November of 2017 we saw record high credit card debt that can limit your chances when purchasing a home. Did you know that 30% of adults live with their parents or a roommate? Even rental rates are up, not only for apartments but houses, also for town homes and condominiums. You should be seeing more apartment complexes coming online in 2018 to accommodate some of this demand. That should slow the increases in rental rates.

Did you know that more than half of all Texas households cannot afford a home price at $200,000 or more? Nearly 3/4 of all households cannot afford a home priced at $300,000 or more, and only 16% of all households can afford a home priced at $400,000 or more. According to Texas A&M University’s research center, for each increase in home price a certain number of households are priced out of homeownership. Higher interest rates and tax rates and a lower down payment decrease affordability and price more people out of homeownership.

Let’s talk about why people move. There are four main reasons that people move. The first is to change homes due to downsizing, wanting a new home, new location, different floor plan. Second is family related, marriage, divorce, more children, better schools. The third reason that people move is for employment opportunities. This could even be retiring or commuting. We’ll say there’s about 3% of people who just move for other reasons.

In 2016 more than 4.3 million people moved in Texas. 5% moved within the same city or town, and more than half a million moved to Texas from other states. Many of them moved here for jobs. According to The Bureau of Labor Statistics, we’re seeing job growth. Texas has the second highest growth rate in the country.

I can’t do an update without talking about Houston’s resilience after Hurricane Harvey. Did you know that Houston has seen no federal funds for reconstruction? None of the congressionally appropriated federal funding for reconstruction has made it’s way to Texas to rebuild. There were 311,000 homes impacted, and that number is expected to reach 350,000 homes. Houston’s only received money for cleanup but none for rebuilding and we are now competing for funding with California wild fires, Florida’s hurricanes and Puerto Rico. We continue to hope and wait for the federal resources to arrive to rebuild, but the reconstruction efforts are slow without that federal money.

Quick update on commercial real estate sales. They were down in 2017, but we are hoping for a positive outlook this year. Houston has a stronger commercial market than most commercial markets around this state.

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About the Author
Shannon Register

Shannon Register

A native of Columbus, Georgia, and a graduate of the University of Georgia, Shannon is the Broker / Owner of Register Real Estate Advisors. She holds over nine real estate Certifications and Designations. Shannon is the host of "Houston Real Estate Radio" on NewsRadio 740 KTRH in Houston. You can learn more about Shannon HERE.

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