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The Tax Cuts and Jobs Act is affecting the housing outlook, according to new research.

Approximately two-fifths (41 percent) of experts in Zillow’s 2018 Q1 Home Price Expectations Survey have a less optimistic outlook as a result of the reform; 31 percent, however, are more positive. Twenty-eight percent have not amended their forecast at all. Over 100 experts participated in the survey.

With the economy heating up, and the indefinite outcome of the reform, there are concerns that the Federal Reserve could jump the gun on rates, says Aaron Terrazas, senior economist at Zillow.

“By expanding the standard deduction, tax reform will put more money into the typical American’s pocket in 2018, which will boost spending and could help renters save faster for a down payment,” Terrazas says. “The longer-term outlook is less rosy. There is some concern that tax cuts at this point in the business cycle may be throwing fuel on an already ranging fire and could lead the economy to overheat. Most economists we surveyed see a stronger outlook for the housing market over the next year or two, but a more pessimistic outlook on the longer horizon.”

The experts are forecasting higher home values in the short term.

“The persistent short supply of entry-level homes for sale has highlighted just how bifurcated the U.S. housing market has become,” says Terry Loebs, founder of Pulsenomics, which conducted the survey with Zillow. “The experts project that the value of homes in the bottom third of the market will appreciate at 6 percent this year—double the rate expected for the highest-priced tertile.”

According to Loebs, come spring, competition will be the norm.

“Limited inventory of low-priced homes, coupled with expectations for rising interest rates, likely foreshadow a frenetic, anxiety-filled spring buying season for qualified first-time homebuyers,” Loebs says.

For more information, please visit www.zillow.com.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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