This is the first article in a new series highlighting 2018 real estate trends.
Judging by the scarcity of 2018 housing market forecasts, it’s safe to say that many feel it’s a bit early to be thinking about next year. We beg to differ.
You’re just a few months away from implementing that 2018 business plan (you are working on it, right?) and knowing where you’ll need to focus your marketing dollars and energy is critical.
To learn that, you’ll need, at minimum, an idea of what type of market you’re facing, who the major players will be and how you’ll reach them. You’ll also need to know what will work and what won’t in 2018.
Over the next few weeks you’ll find trends to pay attention to and how you can best market your real estate business to ride the 2018 wave. Don’t forget to check back!
The 2018 Real Estate Market
If there is one thing most early forecasters agree on, it’s that home prices will continue to rise. Where they part ways, however, is how much they will rise, with some claiming 3.65 percent and others, such as CoreLogic, indicating “that home prices will increase by 5 percent,” from July of this year through July of 2018.
Either prediction is good news for real estate consumers, however, because both beat 2016’s heady increase of nearly 7 percent.
Mortgage rates are expected to increase as well. Back in late March, Federal Reserve Vice Chairman Stanley Fischer told CNBC to expect two more rate hikes by the end of 2017. We got one of them in June and, in July, the Fed decided to hold off on another. But forecasters predict the next one will hit in December.
Forecasting how high 2018 mortgage rates will climb is nearly impossible, although, back in April, the Mortgage Bankers Association (MBA) said that they expect the “benchmark 30-year rate to climb above the 5% threshold sometime around the middle of 2018,” according to Brandon Cornett at the Home Buying Institute.
So, yes, homes will become less affordable for those on the edge of the affordability envelope. Many will be knocked completely out of the buyer pool. But, have no fear – the boomerang buyers may just make up for the loss of the cash-strapped buyer.
Gear up your marketing for boomerang buyers.
While exact figures vary, the National Center for Policy Analysis estimates that as many as 10 million Americans were forced into foreclosure when the housing bubble burst. The effects of the Great Recession, which officially ended in June 2009, according to Investopedia, will finally ease for about 1.5 million of these Americans.
The waiting period after a foreclosure is seven years, measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower. If the borrower can document extenuating circumstances, the wait may be cut to three years.
Get to know this group of potential buyers:
Knowing your audience is half of the battle when it comes to marketing. From the content you offer up in your newsletters and on your website to the stories and videos you choose to share on social media, laser focusing your marketing efforts, especially early in the year, is critical.
So, who are these buyers-on-the-rebound?
They need low down payment loans.
“Comparisons of the buying preferences between boomerang buyers and traditional non-distressed, owner-occupied repeat buyers show that boomerang buyers are, on average, four times more likely to finance with FHA loans than the latter,” suggests Kristine Yao at CoreLogic.
Content geared toward these buyers should let them know that the mortgage process has changed since they purchased their last home. Remember, lending standards were beyond loose and they may even have bought the home with no down payment. They need to know that most mortgages require down payments today.
Information on the FHA loan process — how to get the lowest down payment in the program, how to buy a condo with an FHA-backed loan, how to find out if a condo community is FHA-approved – is valuable information to 2018’s boomerang buyer.
They’ve been forgotten.
Watch TV for any amount of time and you’ll see that millennials and baby boomers are the primary target for marketers. If you hope to attract the rebound buyer, however, you’ll be the one marketer in town who focuses on the forgotten generation, Gen X.
The average age of a homeowner who lost a home to foreclosure during the recession was 45, according to a report published by the Federal Reserve Bank of St. Louis. So, expect that your average boomerang buyer will likely be in his or her early 50s.
And, there’s proof that they’re already reentering the housing market, according to Realtor.com’s Clare Trapasso. Members of Gen X are “the only generation to buy more homes last year than it did in the previous one.”
When choosing an agent, these tech-adept, pragmatic individuals want, more than anything else, proof that you’ll do what you say you’ll do, so include lots of testimonials and success stories in your marketing materials.
Get active on social media as well, because, according to Adweek’s Robert Klara, 75 percent of Gen Xers routinely rely on social networks and online reviews when researching products and services.
Most of all, members of this generation are focused on their bonds with their children. Proving the value of homeownership by putting it in terms of “protecting and nurturing” their child’s future will appeal far better to them than other generations.
They are currently renting.
If you don’t currently market to tenants, make 2018 the year that you start. When doing this, your real estate CRM will be your most important tool, so dig into it and start focusing on more renters.
Target apartment complexes, condo and townhome communities. Aside from talking up the financial benefits of owning rather than renting, let them know about local, state and national down payment assistance programs. Ask your preferred lender to help you create charts or other visuals showing these potential buyers that they can own a home for the what they currently pay in rent.
“Tired of paying rent? Own a new home for $799/mo.” is an incredibly powerful message to someone who doesn’t know about the various programs available to homebuyers.
Keep boomerang buyers in mind as you put together your 2018 business plan. There is huge potential in this pool of opportunity.
We’re excited about the real estate industry in 2018 and the opportunities available to agents. Check back next week to see what’s in store and learn more!
Great insight. Looking forward to upcoming reports.
Thanks, Rhonda. If there are ever any topics you’d like to see covered, let us know!
Great insight about future investments
Great Article. As a Gen-Xer, I can relate to this article very well. Forgotten? Yes! I never thought about it like that until reading this article, but yes, we are. Going through a foreclosure myself (with husband), which finalized 8/2009, we are JUST NOW eligible for traditional mortgage financing. Everyone we have talked to about trying to buy a house, said come back after the 7-yr post foreclosure mark, nothing they could do for us until then. Meanwhile, we are watching from the sidelines with heavy hearts, as housing prices swing back up.
Buying a townhouse in 10/2007 for $265K, then watching the market literally crash before our eyes just months later, losing a job, and eventually the townhouse, and watching it sell a year after that on the free market for a scant $70K, was an excruciatingly painful lesson I will never forget. Trust? Absolutely! We were told when we bought, get in now before we are priced out. Prices had just begun to soften a bit, so “now is the time to get in,” and “soft landing” were the buzz words of the day.
I have become obsessed with the real estate market since. I do not believe we are in a bubble,in fact, I believe this market has plenty of room to grow in the current cycle. But many other Gen Exers do believe this is another bubble, or at least, they are having fears that it is… or could be… and so, have adopted the “burn me once, shame on you, burn me twice, shame on me” mentality. The Gen Exers I talk to are planning to wait until “after the next crash,” and then swoop in and take back the opportunity that was lost to them in the Great Recession. I’m sorry to say, but I believe they will be heartbroken again when prices continue to rise, and if/when prices do top out in the current cycle, and pull back, it won’t be the crash they are hoping for. It will once again be time/opportunity lost.
Just my 2 cents.
Thanks for your comment, Jennifer. We’re all watching the market from different places right now and your perspective and unique insight are so valuable.
Interesting perspective on the upcoming year. Getting my marketing and business plan completed so I can push forward with my running shoes on.
Great article for new real estate investors! In the upcoming year 2018, due to increase in home prices, it is very difficult for many home buyers to buy a house. Always be active with social media to get aware of the real estate latest market prices. Keep sharing!
Thanks for giving this information
So, all those who were hit on their faces with chapter 7 bankruptcies in the last recession, would probably re-enter the current market. A market which would soon be affected by the corporate tax cuts by the Republicans, just like the one in 2002, which had led to the debt-financing real estate crash later. The tax cuts are different this time, but the design is same, and it would likely show repercussions in all sectors very soon.
I too am a GEN Xer who was affected by the Great Recession, along with my husband, having to short sale our home back in 2011. My husband lost his job (I was staying home with our two very small children) and we depleted our savings over a 2 year period of time while my husband worked tirelessly at a job that paid a 1/4 of what he was being paid before, while I waited tables at night (so we didn’t have to pay for daycare).
I am in agreement with the what Jennifer wrote above, I believe there won’t be another bubble or house of cards like what we experienced in 08 due to different lending practices that are in place now. I think the rapid increase in home prices will flatten out this year or the following due to the fact that peoples incomes are not keeping up with the increase in home prices.
I actually became a real estate agent 3 years ago, as I too, became obsessed with real estate after the trauma my family and I faced. Thankfully my husband got a terrific job and we were able to put 20% down a buy a home 5 years ago.
I am hopeful that the tax cuts to both families and businesses alike, combined; I pray, with “REAL” affordable health care sometime very soon, will spur on good paying full time jobs and put a little bit more money in peoples pockets that can be used towards down payments and/or closing costs and allow more home buyers to enter the market place or move to a home of their dreams. If the extra money isn’t used for a home then hopefully in the free market place where they use that money the way they wish to use it (since they earned it) and not forced given to the government for it to be wasted.
Best wishes to you Jennifer!!!
2017 was a notable year in India owing to the number of financial reforms introduced by the government. While 2017 will go down in history for all the right reasons, 2018 will be a model year in its own right. 2018 is expected to see a huge spike in the real estate industry and the effects of it on real estate are already visible.
Real estate market is a profitable market to create a wealthy life.