Region’s strong housing demand surprises in 2017
As 2018 begins, northeast Indiana is enjoying one of the nation’s best housing markets, says Edison Byzyka, chief investment officer for Hefty Wealth Partners in Auburn.
“Home prices and home demand in northeast Indiana continue to rank in the top 10 nationally” he says. “It’s been really amazing.”
Demand from the booming Fort Wayne market has extended northward, he adds.
“We’re following the national trend a lot more closely than the rest of Indiana,” he says.
The housing boom provided the biggest economic surprise of 2017, Byzyka reports.
“The scare that interest rates may be much higher — that was completely ignored,” he says. In fact, 30-year home mortgage rates, running nationally at 3.8 percent, are lower than a year ago, when they stood above 4 percent.
He finds no indication that the demand is going to drop in 2018.
“A surprising emergence into the market by millennials for existing home sales” helped fuel housing, Byzyka says. Buying an existing home can be $50,000 to $100,000 cheaper than building a new home.
“A lot of people selling their existing homes are actually building,” he adds. “I don’t think they can build them fast enough, given that existing home sales are through the roof.”
Wage growth will continue to be a major story in 2018, Byzyka predicts.
This year saw the fastest pace of wage growth since the Great Recession, he says.
“We’re seeing this really strong labor market” as the new year arrives, he adds. The underemployment rate — including part-time workers who want to be full-time, is running well below its 25-year average.
After wage growth of 2.4 to 2.8 percent this year, “We should be seeing wage growth near the 3 percent mark,” he says.
The newly passed federal tax plan could contribute to wage growth, he says. It depends on how those corporations use their tax savings. They could raise wages, but they also could pay dividends to shareholders or buy back their stock.
The largest corporations may not save as much as predicted from the tax bill, he says. They already pay less than the official rates thanks to “rooms full of tax lawyers” who help them write off expenses such as research and building projects. As one example, he says, Microsoft pays an effective tax rate of 8 percent.
“The companies that will benefit are not necessarily your big, household names,” he says, because smaller companies cannot afford tax strategists.
After a strong year for stocks, “It is very hard to find somebody that’s negative for next year,” says Byzyka.
That’s why, he says, “It’s really, really important to be cautious” in 2018.
Occasional dips of 7-10 percent n the market are very normal, Byzyka says, “but we just haven’t seen it” in 2017.
Byzyka says his firm hopes to see some volatility in 2018, because that brings opportunities “to catch companies that have experienced downside and ride them back up.”
Byzyka does not see much risk of those downsides growing into a recession next year. Reports show what he calls a drastic increase in companies spending on infrastructure and equipment.
“Historically, that has never led to a recession the following year,” he says.
Looking toward 2018, Byzyka sees uncertainty from a new chairman of the Federal Reserve Board.
“We have no idea what kind of chair he is going to be,” Byzyka says. Under outgoing chair Janet Yellen, he says, the Fed has been “very unconventionally transparent” about its future moves.