Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
Predictions for a new year are always erratic, but this year will prove to be even more of a challenge. With the new tax plan in place, and President Trump in the full driver’s seat, the market is sure to change. Far be it from me to chime in on any of the myriads of delicate market considerations, but I did want to share some thoughts on what to be on the lookout for in 2018…
For starters, the stock market seems a little vulnerable. For those that have said the same last year, they were certainly on the wrong side of that trade. We continue to see record-breaking numbers almost on a weekly basis. We are at a thirty-year high in market optimism – the highest since 1987. Clearly, that is a dangerous notion, but one that many entrenched in the market seems to be ignoring these past few years. We are seeing the most expensive stock market price-to-sale comparison ever. The last time we had these highs was in 2000 – right before the market sold off considerably. This is definitely something to keep your eyes on.
If investments in stocks do dwindle, consumer sentiment will be impacted. If the change in tax policy does quickly bleed its way down to main-street, the real estate market might be directly and quickly impacted. This week I spoke to a savvy financier and accountant who prides himself on maximizing all tax opportunities possible, and he bluntly said he doesn’t “fully understand all of the moving parts” of the tax changes. The reduction of interest deductibility and the change to the standard deduction will have an impact. Specifically, in six states, specifically California, New York, New Jersey Connecticut, Illinois and Massachusetts – the high tax states, will be impacted most.
On the surface, the reform gives “renters” big advantages, especially in larger markets. The market will certainly adjust to try to combat that. Similarly, home affordability will be on the forefront of all home buyer’s minds, and everyone in the marketplace will need to fine-tune itself. Builders, developers, investors and the like will need to figure out creative ways to deliver cheaper homes to first-time home buyers. Many predict slower home price growth, continued inventory limitations, and sluggish sales early in the year. That said, most are still expecting about a 5% national home appreciation across the U.S.
Interest Rates will remain low but will see volatility throughout the year as the 10-year US treasury establishes its trading range. Inflation, which has been lower than desired, will continue to be one of the primary ‘drivers’ of policy. The bond market (and thereby mortgage rates) would be the biggest beneficiary from stock sell-off. Absent a stock market drop, Interest Rates are poised to rise. I would continue to watch the flattening yield curve of the 2yr vs 10y treasuries, as a cautious sign. If it becomes inverted a recession is likely. Most are predicting at least 2 or 3 Fed rate hikes. Something that will surely impact the markets.
Large commercial banks will be forced to reevaluate their mortgage lending and participation. Many will exit the business altogether to focus on higher-yielding channels. Some will cut margins, some will cut staff, and some might become a little more aggressive with certain products. It will definitely be a defining year for many banks.
All in all, it will be a busy year full of action-packed movement. I am excited to announce a special analysis that I have compiled from top real estate professionals in the area. These are agents who have had a tremendous influence on their local marketplace, or the real estate industry as a whole and their insights and comments are immensely valuable. See more information on the inside back cover of this publication.
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