Thursday, July 26, 2018

Are We Heading Towards Another Housing Slump?

Although many are happy with the short term benefits of the recent tax cuts I have said for awhile that I fear there will be a negative impact on the housing market as a result. My predictions may not be too far off.  An article by Bloomberg suggests we may be headed to a major slowdown in the housing market. (Of note, at the time of this blog the Massachusetts Housing Market is setting new records but we tend to lag behind trends on the West Coast and other parts of the country.)

In addition, early this week there was an article in the WSJ Housing Slump discussing the cause for fallen sales. In combination of a lack of inventory and rising interest rates there are less new buyers entering the housing market. Many millennials are burdened with high student debt. Further the mortgage deduction reduction to $750K and the removal of the property tax deduction also impact housing purchase decisions in the more expensive home markets. All this coupled, with few affordable places to move once one sells may result in sellers delaying this process.

According to Mreport aside from low inventories and rising interest rates the costs to build are increasing as a potential side effect of the immigration ban (less low wage workers entering the country) and tariffs. Prices for lumber have increased significantly since the Canadian tariffs were put in place in 2017. This makes new construction more expensive and out of reach for some.


We don't yet have a long history of the tax cut's impact on the housing market. Time will tell how the overall market will be affected. My guess is that it is heading in the wrong direction.

Wendy is a Realtor with Coldwell Banker in Needham, Mass. She enjoys working with buyers and sellers and welcomes referrals. Check out her website at www.wendybcb.com.

Addendum: Interesting indicators in Boston Globe Sunday August 12, 2018 for another recession

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