Whether you’re a new or existing homeowner, or you’re planning to buy a home this year, you should keep yourself abreast of the latest news and regulations when it comes to mortgages and the real estate game. We’ve rounded up five trends to keep an eye on in 2018.
An increase in home sales
There has been an increase in mortgage applications, which has led forecasters to assume that home sales will rise in 2018. Also influencing these predictions are reports showing an increase in single-family home construction. A report by Freddie Mac’s Economic and Housing Research Group predicts a 2 percent increase in home sales from 2017 to 2018. However, this doesn’t mean that inventory has increased much, which has made home prices rise, but not exorbitantly.
Increase in cash-out refinances
Although rate refinances have been on the decline, cash-out refinances that allow homeowners to obtain cash against their home’s equity are increasing. There have been more cash-out refinances since equity is on the rise. In fact, homeowner equity topped more than $13 trillion in 2017. Because of this, cash-out refinances are up significantly since 2017.
Home prices increase at a slower rate
Although home prices have gone up, they’re rising at a slower rate than in previous years. In 2016, home prices rose by 6.3 percent. However, it’s predicted that home prices will rise by only 4.1 percent in 2018. Again, this is largely due to the increase in home construction. The forecast for more home construction is based on a large number of building permit applications.
Lenders embrace automation
There’s been a big uptick in loan automation programs. Lots of bigger banks are getting on board, but smaller ones are taking to the trend too. The goal is to make loan application and approval processes smoother, and to make it easier to introduce new products to clients. Two major software providers, Blend and Roostify, are getting their automation products in the doors of both big and small banks.
New tax plan regulations will affect deductions and refinances
There are a couple of components from the tax reform plan that new and existing homeowners should keep their eye on.
Mortgage interest cap: There is a new cap on tax deductions taken on mortgage debt. Homeowners cannot deduct more than $750,000 from mortgage debt.
Second mortgage rules and interest deduction cap: You may deduct interest on refinance debts, but it also cannot exceed $750,000. Keep in mind that the funds must be used for substantial home improvements.
These are the latest mortgage trends for 2018. For further information, contact your local lender and/or accountant.