New tax legislation has made homeownership more costly in high-tax states, which may shift the preference toward renting in expensive markets. Analyst Blitzer observed that certain areas could see potential home buyers compelled to look at renting instead. Compass president Leonard Steinberg has discussed the uncertainty around state and local tax deductions in states like New York, California, and Illinois. Student debt and rising prices continue to compound affordability challenges for younger households looking to save for down payments.

The new tax laws restricting state and local tax deductions may make renting more attractive than buying in high-cost markets, particularly on the West Coast. In expensive areas, potential home buyers may find themselves compelled to look at renting as a more viable option. High rents and student debt continue to challenge younger buyers’ ability to save for down payments, creating additional barriers to homeownership.

Federal Reserve rate increases have had modest effects on mortgage rates so far. Experts anticipate mortgage rates will finish 2018 between 4% and 4.5%, though they disagree on the path to reach that range. Trulia’s chief economist Ralph McLaughlin expects a steady rise in rates, while Bankrate’s Greg McBride anticipates more volatility with temporary dips potentially bringing rates below 4% at times.

Homeownership rates ticked up in 2017, with the third quarter showing 63.9% of households being owner-occupied. As millennials age and reach life milestones like marriage and parenthood, their housing demand is expected to drive continued growth in homeownership rates. Millennials are entering the housing market at rates comparable to previous generations, reversing the previous years’ downward trend in homeownership.