December 11, 2017
Redfin Predicts Homebuyers Will Leave High-Tax States in 2018 If SALT Deductions Are Eliminated

Fewer Homeowners Expected to Sell Due to Longer Residency Requirements in Tax Reform Bills

High-income Millennials Will Popularize the “Urban Suburb,” Suburban Neighborhoods with Public Transit, Walkability and Amenities

SEATTLE--(BUSINESS WIRE)--Dec. 11, 2017-- (NASDAQ: RDFN)—The 2018 housing market is expected to be shaped by continued demand for homeownership, tax reform’s effect on affordability and low inventory. This is according to Redfin (, the next-generation real estate brokerage, in its predictions for the 2018 housing market. Redfin chief economist, Dr. Nela Richardson, expects the 2018 housing market to be the fastest on record, with 30 percent of homes that sell next year going under contract within two weeks, up from 25 percent in 2017.

Redfin’s Predictions for 2018:

Prediction #1: Homebuyers Will Leave High-Tax States

If state and local tax (SALT) deductions are eliminated in high-tax states like California, New York, New Jersey, Maryland, Massachusetts and Illinois, some people will leave these states for places where they can get more home for less money. In a survey of 900 homebuyers, a third of respondents said that they would consider moving to another state if they could no longer deduct state and local taxes. Redfin migration data on its website users’ search activity reveals that people are looking to leave expensive coastal cities for more affordable mid-tier cities like Sacramento, Phoenix and Atlanta. The trend has already started, and tax reform, if passed, will just intensify it.

Prediction #2: Fewer Homeowners Will Sell Due to New Residency Requirements in Tax Reform Bills

Under current law, single homeowners can exclude $250,000 of sale proceeds from capital gains taxes as long as they’ve lived in the home for two out of the previous five years. Couples can exclude up to $500,000. However, a new tax-reform proposal increases the number of years to five of the previous eight years in order to deduct gains. This change will incentivize some homeowners to stay in their homes longer.

Prediction #3: Wealthier Millennials Will Popularize “Urban Suburbs”

Certain high-income millennials are driving the formation of a new kind of neighborhood—the urban suburb.

“We’re not talking about the Baby Boomer McMansions with huge yards, where you have to drive a couple of miles for a cup of coffee,” said Redfin Kansas City agent Wayne Gray. “We’re talking about neighborhoods outside the city, but still relatively densely populated, with walkable amenities and bikeable commutes.”

West Chester, Penn., Arlington, Mass. and East Meadow, NY top Redfin’s list of urban suburbs expected to see an increase in demand from millennials in 2018.

Prediction #4: Homes will Sell Faster than Ever, Up to 30% Within Two Weeks

The 2017 housing market was fast, with 25 percent of homes selling in two weeks or less during the peak of the buying season, and nearly 1 in five homes (19%) off-market in less than a week. We expect 2018 to be even faster.

Prediction #5: Mortgage Payments Will Increase at the Highest Rate in a Decade

A combination of rising home prices and increasing interest rates is likely to push monthly mortgage payments up even further next year.

Prediction #6: No Price Bubbles--Even in the Hottest Markets

Redfin analysts do not expect a bubble anywhere in 2018 for two main reasons:

1. Buyers and sellers remain on the same page when it comes to price, with a sale-to-list ratio at 100 percent or above in the most expensive West Coast markets this year.

2. In West Coast metros where prices have now surpassed their 2006 peak, homebuyer debt has declined.

Prediction #7: The ‘Golden Girls’ and ‘Friends’ Return

Roommates accounted for or 6.6 percent of all households (8,330,000 households total) in 2017, according to Census data. Redfin analysts believe the trend of more people living with roommates will accelerate in 2018 due to the lack of affordability combined with new startups aimed at solving the problem.

“Inventory is expected to be the major factor shaping the 2018 housing market, but that’s nothing new,” said Dr. Richardson. “For the third year in a row, the nationwide inventory shortage is likely to continue to hinder sales and increase prices. We expect small increases in inventory at the high-end of the market by year-end. Starter-home inventory has not increased meaningfully since 2011, and we don’t expect it to increase at all next year. Exacerbating the problem is high rents and vacation home rental platforms that make it both easy and lucrative to own more than one home.”

To read the full report, complete with data and additional insights, please visit:

About Redfin

Redfin ( is the next-generation real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer's favor. Founded by software engineers, Redfin has the country's #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 80 major metro areas across the U.S. The company has closed more than $50 billion in home sales.

For more information or to contact a local Redfin real estate agent, visit To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, subscribe here. To view Redfin's press center, click here.

Source: Redfin

Redfin Journalist Services:
Rachel Musiker, 206-588-6863