Real estate market sees a few new trends

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Published Date 3/5/2018

Realtor Report

Real estate market sees a few new trends

The real estate market continues to evolve. And while we can’t predict how interest rates will affect the landscape, several new trends are emerging for 2018. As the housing supply finally catches up with buyer demand, more millennials will be looking to own homes, finally ditching the rental market or their childhood bedrooms.

According to the Forbes Real Estate Council, here are a few of the trends that will have an impact on real estate in 2018 and beyond.

The sharing economy means more co-living and community-driven spaces. The multifamily industry continues to morph, reflecting a new crop of renter demands as the need for unique experiences and services will heighten competition.

The short-term rental market has created a boom in opportunity for large property owners or the single family owner. While some rent out rooms only occasionally for extra cash, others look for renters to take over their properties for vacation rentals, accessing a global population of travelers looking to avoid hotel living and its associated costs.

Crowdfunding is going mainstream as consumers look for greater diversification and passive investment opportunities with fractional investing. Some extremely credible startups have innovated in this space over the past few years, with the future possibly leading to some individuals moving away from sole ownership to fractional ownership via crowdfunding.

We've reported on this before, but the tiny living and mobile living are still a trend, especially where increased urban housing density is the rule and not the exception to it. As a result of this trend, which will continue over the next decade or so, operating income on existing apartment stock will increase.

The new tax bill as well as interest rates will have an effect on the number of first-time home-buyers entering the market, but also look for the implementation of appraisal management company regulations in 2018, which will increase costs, resulting in a good-sized impact on the real estate industry. Anything that increases the cost of doing business affects the cost to the consumer.

While these and other trends add new colors to the real estate landscape, it's important to pay attention to jobs and wage increases in 2018 as well. No one has a crystal ball regarding any market, but for the time being the dream of home ownership is still alive and well.

Source: TBWS

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Higher

Mortgage rates are trending higher so far today. Last week the MBS market improved by +3bps. This moved mortgage rates sideways last week. Mortgage rate volatility was relatively low last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1) Geopolitical, 2) Central Bank and 3) Jobs.

1) Geopolitical: Tariffs and NAFTA. We still do not know the full specifics of the newly proposed tariffs. The bond market will be focusing on what "waivers" are issued, and to which companies/countries. Also, it is now very clear that tariffs on steel, etc. are being used as leverage on this week's NAFTA negotiations. Bond traders will closely monitor responses from other trading partners and more details from Washington.

2) Central Bank: The spotlight is on Thursday's European Central Bank meeting as the ECB will give us their latest interest rate decision and policy statement. Last week, Japan surprised markets by hinting at ending QE sooner than expected and on Friday will get the BofJ's interest rate decision and policy statement on Friday. We will also get the Bank of Canada's interest rate decision and policy statement.

3) Jobs: We get a lot of job and wage-related data almost every day this week either as an official headline release or an internal component of another type of economic release. Friday's YOY change in the Average Hourly Wage data will have more impact on rates than any other piece of jobs related data.

Fed: On Wednesday we get their Beige Book which is prepared specifically for the March FOMC meeting where it is widely expected that they will raise their Fed Fund Rate.

03/05 Randal Quarles
03/06 William Dudley, Lael Brainard, and Robert Kaplan
03/07 Raphael Bostic, Beige Book
03/09 Charles Evans

This Week's Potential Volatility: High

Mortgage rates could be very volatile this week with the steady flow of jobs numbers, Central Bank meetings, and tariff talks. Hard to tell which way mortgage rates will shoot this week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.