Thanks to recent tax reform, we are already experiencing a boost to the economy resulting in economic growth. According to a recent Fannie Mae Economic and Housing Outlook, an increased amount of business investment will encourage GDP growth throughout 2018. This is expected to boost housing demand, as well as many other commercial markets.
Economic Growth – Personal Factors
Matthew Classick, in a report from Fannie Mae entitled “Tax Reform Expected to Boost Growth, if the Fed Gets It Right” breaks down what the Fed needs to do. He says, “Complementary policy decisions from the Fed are key to continued expansion, however, as the possibility of overly aggressive monetary tightening intended to preempt rising inflation could pose downside risk.”
Economic growth will be spurred on by a continued decrease in unemployment. These numbers have been falling steadily for years, and it is expected to hit the lowest numbers in 50 years. Perhaps more importantly, we expect continued growth in wages across all income brackets, which typically increases spending.
Another reason for the economic growth? The Fed has targeted a 2 percent inflation rate, and it looks like that should be hit. There is a chance that the Fed could raise interest rates at least twice in 2018, if not a third time.
Economic Growth – Governmental Reasons
One of the main reasons for economic growth is tax reform by Congress.
“The recently passed tax bill should provide a shot in the arm for an expansion that, while long in the tooth, likely brought the best full-year performance during 2017 in three years. The question for 2018 is less about the impacts of the tax cuts for consumers and corporations than about how the Fed manages the pace of monetary policy normalization amid a simulative fiscal environment,” said Fannie Mae Chief Economist Doug Duncan.
Of course, the political landscape will continue to have an impact on economic growth as well. Any fallout from the tax bill could result in consumer hesitancy, which would have a negative effect.
Boost in Housing Demand
Duncan goes on to further explain what this will mean for the housing market: “As we see it, the traditional view of a tradeoff between employment and inflation lacks solid empirical support in recent decades, and aggressive monetary policy to ward off a potentially overheating economy may do more harm than good. Managing a ‘soft landing’ will be a difficult but critical task for policymakers in 2018. Additionally, the new tax laws are likely to motivate a mixed response in the housing market: Increased disposable household income should lead to greater housing demand, but changes to deductions essentially reduce the subsidy for homeownership. On balance, we expect the housing market in 2018 to encounter many of the same challenges as last year, including inventory shortages, particularly in the middle and lower-end of the market, and affordability headwinds.”
Though the housing market is a bit sluggish at the beginning of 2018, it should accelerate as we move forward through the year. This should result in a more competitive environment and higher home prices.
Important to Work with a Top Mortgage Broker
As an improving economy pushes up home prices and interest rates, it’s more important to select a top mortgage broker to help you buy a home. Because, a good mortgage broker can give you a competitive advantage in a strong housing market with low inventory.
Homebuyers using a mortgage broker with a reputation for doing rigorous mortgage pre-approvals have more credibility with Realtors and sellers. Therefore, these homebuyers are in a better position to negotiate on price, especially since they often have the ability to close quickly.
Also, since these homebuyers often get a lower interest rate than other buyers, they save money on their mortgage and have more purchasing power. They are, therefore, more competitive when competing for a home.
Working with a mortgage broker who can close quickly is also very important, because sellers are motivated by a quick close.
- Sellers can save a great deal of money by closing before their next mortgage payment is due.
- Some sellers need to close quickly to buy another home already under contract.
- Homebuyers who can close quickly can beat out the competition, while also buying the home for a lower price.
Marimark Mortgage often closes in 30 days or less. We are based in Tampa, Florida, and serve the mortgage needs of homeowners and homebuyers in Florida, Virginia, and Pennsylvania.
We offer our clients rigorous mortgage pre-approvals, low interest rates, and fast closings. We specialize in conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients with HARP refinancing to lower their monthly mortgage payments.