Tight inventory, rising home sales and migration shifts are among the trends — both positive and negative — to watch for in 2018, according to Re/Max Co-Chief Executive Officer Adam Contos.
In a 2018 outlook issued Monday by Re/Max, Contos characterized historically low housing starts, down 2.9 percent year-over-year according to Re/Max data, as the biggest threat to a housing market currently oversaturated with high-end luxury homes and multi-family residential construction.
“Even though there’s a shortage of labor and a spike in material costs, the primary reason for the low starts is that builders have focused on more profitable, higher priced homes and multi-family residential construction,” Contos said in a statement. “We can’t blame them, but we need more entry-level houses. We’d love nothing more than to see the next generation of homebuyers start building equity now. We saw glimmers of hope at the end of the year as U.S. single-family homebuilding a permits began to surge.”
On a more hopeful note, Contos predicted escalating home sales, potentially surpassing record growth tallied in 2006, thanks in part, he said, to a highly-anticipated decision by Amazon to build a second headquarters somewhere else in the U.S. in the near future (the current Amazon HQ is in Seattle, and the city has seen a real-estate boom in recent years).
Nonetheless, he laid out several caveats, including negative impact from the Trump Administration tax overhaul, that could stymie growth in the new year.
In particular, a $750,000 cap on mortgage interest deductions for primary and secondary homes — as well as restrictions on state and local tax deductions — could serve to deter new homebuyers in 2018.
“What would slow us down?” Contos asks. “Any negative impacts on the stock market, even tighter inventories (there’s that word again), a repeat of 2017’s devastating hurricanes and fires or even the recently signed tax reform bill… But we’ll wait and see what the real effects are of these provisions as buyers weigh their options with financial planners.”
Contos also cited shifting migration patterns, in which homebuyers flee expensive metropolitan markets for less populated suburbs, as yet another emerging trend. Millennials and aging baby boomers are expected to lead the retreat in 2018.
The 2018 Re/Max report comes in the wake of an internal investigation into possible code of conduct violations involving Contos and Co-CEO David Liniger that abruptly delayed a planned third-quarter earnings report in November that, two months later, has yet to be rescheduled.
The inquiry by a special committee into an undisclosed personal loan from Liniger to Contos, who was appointed in May to co-lead the global real estate franchise, arose in October and has yet to be concluded, a spokesperson confirmed to Inman last week. The purchase of a $2.4 million residence by Contos “at a below market interest rate,” and the exchange of both cash and non-cash gifts, are at the center of the investigation, according to public statements.
Email Jotham Sederstrom