NYT’s Spring 2018 Housing Market Analysis

Posted by Amrock

Factors affecting the housing market this spring, such as mortgage rates, tax reforms, price appreciation and housing supply, are creating an unusual mix of economics, reports the New York Times. The paper of record says this year’s home-buying season could be one of the most interesting seasons in years, given the many variables.

Long-term fundamentals and shorter-term “ripples”

The article argues the pace of the spring buying season will depend on which opposing forces prove more powerful, long-term fundamentals, such as supply and demand, or shorter-term “ripples,” such as tax reform and heightened mortgage rates. This mix could result in a period of “uncertain dealmaking,” according to the report.

In terms of mortgage rates, buyers entering the market today can afford less house than they could in September of last year. That is largely due to an average 30-year, fixed-rate mortgage ticking up more than 65 basis points to 4.45 percent in the intervening months. The article notes that increase could mean a family seeking a mortgage payment of $2,000 a month can afford to borrow $30,000 less.

Tax reform changes complicate deductions

However, the math gets more complex when the new tax changes are taken into account. The analysis notes that a married couple in Connecticut with an income of $300,000 and a $1 million mortgage would miss out on $11,000 in mortgage interest deductions in the first year under the new law. The same hypothetical family could lose out on the ability to deduct nearly $22,000 in property taxes. Moody’s Analytics told the news outlet that the new tax changes would likely slow the rate of price gains over the next couple years.

Housing demand not slowing anytime soon

On the other hand, the analysis concludes that housing demand is increasing steadily, and that trend is likely to continue for the foreseeable future. Meanwhile, supply issues have already led to pent-up demand. In short, these long-term fundamentals could outweigh opposing pressure from mortgage rates and tax changes.


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