Three Housing Trends Americans Should Know for the First Three Months of the Year

The first three months of a new year are typically the slowest home buying months. Statistics show that most Americans do their home buying later in the year. However, if you plan on buying a home sometime after March, you should start your preparation now. Here are three housing trends you should follow during the first three months of the year that will help you prepare to buy or sell a home.

Plan Now, Buy Later

Spring and summer are the busiest homebuying and selling times of the year. If your goal is to buy during these months, you need to plan your course of action now since you will be facing fierce competition. With the housing market short on inventory, you will probably face multiple bidders on the same property. With more people bidding, sellers are most likely going to accept the bid from people who have their financial house in order, no pun intended.

Many real estate professionals recommended that you have your ability to repay your mortgage finalized at least three months before you start shopping for the perfect house. During those three months, you can thoroughly analyze your credit report, which will give you time to correct any errors you may find. If your credit score is marginal (620-680), you will have time to start improving your score. Remember that the higher your credit score, the less interest you will pay over the life of your mortgage.

Experts also recommend that you talk with a mortgage professional before you choose a real estate broker or agent. A mortgage consultant can help you determine your ability to repay and help you determine if you can afford certain houses. The last thing you want to do is find a home that you love only to learn it is unaffordable.

Follow Mortgage Interest Rates

Most economists speculate that mortgage interest rates will rise during the first three months of the year. Although rates held steady toward the end of last year, forecasts from Fannie Mae, the National Association of Realtors and the Mortgage Bankers Association show rates will rise by as much as 0.2 basis points, or 0.2 percent. At the start of 2018, the interest rate on a 30-year mortgage with a fixed-interest rate stood at 4.09 percent. If those three agency forecasts are correct, the interest rate would rise to 4.3 percent by March. A one or two point basis point rise will have a big impact on your monthly mortgage payments.

Many analysts who cover the housing market speculate that 2018 is in prime position for a significant rise in mortgage interest rates. Some analysts believe the rise will happen because of the new tax law that took effect this year. With a promised increase in take-home pay, analysts believe that spending will increase, which could cause inflation to rise. Some economists say that inflation is the reason mortgage interest rates and bond yields rise.

Learn How the New Tax Law Impacts Homebuying/Selling

2018 is a new year for American taxpayers, and the tax reform legislation that became law could get the ball rolling on a few things. Here are a few ways the new tax law could affect home buying and selling in 2018 and beyond:

• Once the IRS updates its tax withholding tables, many Americans will see an increase in their take-home pay. According to economic theory, higher take-home pay could kick-start inflation causing a significant rise in interest rates, namely mortgage rates.

• Starting in the 2018 tax year, the standard deduction will nearly double. With such a high standard deduction, many homeowners may forgo taking mortgage interest deductions.

• If you itemize your deductions, the tax break you normally received on property taxes will fall. If you live in a high-cost area with above average property taxes, this could hit your pocketbook hard.

However, most economists do agree that how the new tax law will affect homeownership will take some time. Some believe it could take a year or more before the full impact of the tax law becomes clear. How the tax law impacts homeownership should not deter you from using the first three months of this year to follow the housing trends and plan out your home buying or selling needs.

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