The 2018 Economy & How it will Affect Real Estate

It is our responsibility as Agents to inform our Buyers, Sellers, Investors, & Community on the local climate of Real Estate. ❤️ 

Carol Rodoni (a Real Estate & business powerhouse)  recently spoke to us on where this economy is headed and how it will affect our local real estate market. We are thrilled to share this information with you!!

Overview

• The United States Economy is doing well, as well as the Global Economy in Russia, Japan, and in Europe.
• The U.S. Government has achieved their goal of  3% GDP.
• As far as interest rates, the Federal Reserve has been mild on increasing rates. However, they are likely to increase in April, and then double in 2019.
• Huge Corporations (such as Apple, Disney, and Walmart) were given tax cuts and are increasing their benefits and wages to employees.
• Corporations (such as Google and Facebook) have released major hiring increases, including a plan to hire 10,000 new employees.

The Tax Reform & How it Affects Tax Brackets

• A $1.6 trillion tax cut has been put into place to 'support the middle class'
• As a result, tax brackets have been lowered: see how this affects you
  • The highest tax bracket was previously had taxes at 39%. They are now lowered to 37%.
  • If your salary is below $12,000 and are single, you will pay no taxes. 
  • If your salary is under $24,000 and are married, you will pay no taxes. (The first $24k are withheld from taxes)
  • If you have children, your deduction is now $2,000 per child, an increase of $1,000. 

The Tax Reform & How if Affects Mortgage Interest

• If your mortgage amount is less than $750,000, it can be deducted for the interest paid on that loan.
• If your loan is greater than $750,000, you can only deduct the interest up to $750,000, and the remaining amount is non-deductible.

Investing

• When investing in an additional property, do not put the investment under your name. Set up a corporation or LLC and put the investment under that business name. 
  • This is to ensure you are capitalizing on corporate tax breaks & removing liability from yourself
• Capital gains have been reduced from 28% to 24% taxation. This will save the investor money when they sell this property 

Bay Area Real Estate Market

• The Bay Area market is booming! The Silicon Valley has reported at 9% increase in the first quarter. 
• The High-tech companies (using Artificial Intelligence Technology, Self-Driving Cars) will continue to grow, hire, and thrive.
• Millennials will soon be the biggest pool of buyers. 
  • ~85,000 Millennials want to live in a city with a downtown-community vibe that supports an active nightlife as well as walkability (Livermore, Danville, Oakland)
    • Appreciation rates in these areas will be double digits.
  • Millennials who choose to live near communities where Baby Boomers still buying (Antioch, Alamo, San Ramon) will appeal to the mid-trend market.
    • Appreciation rates around 3-8%
  • Luxury Markets with expensive homes (Ruby Hill, Blackhawk, Hillsborough) will lose steam as they are not close enough to community, and not friendly to Millennials.
    • Homes over $2,000,000 will see price reductions.

The Downside

• There is likely to be a hiccup in the Economy in 2002, when the next Presidential Election occurs.
• Land is a commodity were are losing.
  • There is no more creation of land... if you can, buy land.

Conclusion

• The Bay Area Real Estate Market is HOT.
• Prices are high but will only continue to rise.
• The 'trendy' cities that Millennials favor will have rising interest rates.
• The best time to buy is (and always will be) 5 years ago.
  • Buy now and see a great return on investment in 5 years!

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