2017 Real Estate Investor Forecast
As real estate investors, we need to look at both short-term and long-term cycles and trends, as well as national, regional and local market dynamics when evaluating opportunity and risk. We also need to make some (hopefully educated) guesses about political and economic direction in order to gauge where and how to best deploy investment capital. As a new year opens and we shift into a new political cycle, how will things look similar to what we have seen in recent years and how might things differ?
As we here at Safeguard Advisors prepare for our twelfth year of helping retirement investors diversify in to asset classes such as real estate and private mortgage lending, we felt it appropriate to lay out what we see as some of the key factors that will drive success for savvy investors with a self-directed IRA or Solo 401(k) plan. In this blog post, we’ll look at some of the macro trends in demographics, economics and politics that may shape the coming year.
Millennial Homebuyers are Here to Stay
Ultimately, like any other asset class or commodity, real estate is driven by supply and demand cycles. In the last few years we have seen the beginning of a wave of millennials (those born roughly between 1980 and 1999) entering the home buying market. In many cases, their aspirations for home ownership were delayed by weak job markets, lack of available credit, student debt, and the high cost of housing in desirable markets with good jobs. As the economy improved in the last few years, more millennials were in a position to move out of their parent’s home or that shared housing situation with 20-something peers scraping by in a gig economy.
The millennial generation is hitting the peak of their home buying years in a period of economic growth. This translates into more demand for homes.
The National Association of Realtors produced a year-end report looking at 2016 generational home buying trends which shows a precursor of the coming wave of millennial homebuying. In 2015, first time homebuyers represented only 32 percent of all purchases, which represented a 30-year low. In 2016 that number has risen to 35 percent, which is the highest rate since 2013. Those under age 35 made 61 percent of those first-time home purchases.
Now that the millennial generation has emerged from a challenging start to their adult lives, they will certainly be a force in the real estate market for many years to come. Expect this trend of more and more homebuyers in their early 30’s to continue, and that is a pretty big chunk of the population.
Increasing Mortgage Rates
The factors that have led to historically low mortgage interest rates for the last 6 years are still largely in control. Economic growth is steady but slow and there is little in the way of inflationary pressure. The cumulative effect of 8 years of economic growth since the great recession were already starting to put some minimal momentum behind increases in interest rates and that trend will continue through 2017.
Even if there are shifts in either the positive or negative direction for the economy as a whole based on actions taken under a new set of political leaders, those are unlikely to kick in during 2017. As such, most industry analysts expect mortgage interest rates to continue to tick in the upward direction, but slowly and not in any significant amount. It will take either significant and/or prolonged increases in economic growth and resulting inflationary pressures to drive a real spike in interest rates.
The consensus of industry experts queried by Inman Real Estate News is that rates for a 30-year fixed rate mortgage are likely to stay in the 4% range, with the potential to reach 4.5% – 5% by year end.
The impact of a rate rise of this magnitude is not likely to be significant relative to the overall home buying market. There may be pressure on those looking to make their first home purchase to act soon before rising rates put homes out of reach, furthering the trend of increased millennial homebuyers we discussed above. It may also discourage some sellers from moving up, as the financing on a new home will be more expensive than their current residence. All in all, the greatest pressure will be on home affordability at the low end of the market. That has been an issue for many years, so much of a change in 2017.
Greater Access to Credit
One likely impact of a Republican lead government is de-regulation in the financial markets. As a result, the expectation is that banks will be more free to lend on looser terms than in the last several years. Access to credit has been a considerable drag on home sales both for new and existing homes. While it may be a while before we see a significant change in lending guidelines, this is definitely a trend to watch. When we combine greater availability of credit with the increased demand for new homes and rising interest rates, we could see some inflationary pressures on home prices.
Continued but Steadying Home Price Appreciation
Overall, the top economic forecasters expect continued home price appreciation, but at a rate that is less than 2016. Realtor.com in their 2017 Housing Forecast predicts a national rate of 3.9 percent growth year over year, which would be a drop from the estimated 4.9 percent overall appreciation in 2016.
Appreciation is a much more localized issue than the several national trends outlined above, and some regions such as the tech hubs of Seattle, Portland and Denver will see much higher rates in the 6.5 to 7.5 percent range. The West as a whole should see stronger appreciation than the rest of the nation.
The same factors that drive appreciation in any real estate market are at play in 2017. Job growth is expected to continue in the positive direction, as is a long-awaited bump in actual earnings for workers due to an increase in demand for skilled employees. For many of the reasons we have already covered, the demand for housing will continue to outpace supply. Rising interest rates, however, are likely to put a little bit of a damper on increases in home values, as affordability will continue to be a significant factor in most home buying decisions.
The Uncertainty Factor
While most trends look positive, there are some gremlins in the wings, and any smart real estate investor needs to be prepared for downside risks. On both the global and national level, political uncertainty is on the rise. A major terrorist event or increased risk of conflict that impacts US interests and international trade could impact the economy in unknown ways. While the de-regulatory and tax relief implications of a Republican led government with a host of Wall Street veterans in the cabinet may have positive impacts in economic growth of some segments, there is the very real risk of a decline in exports due either to the continuing rise in the value of the dollar and the potential that the incoming president will carry through on some of the protectionist rhetoric of his campaign and create conditions for one or more trade wars.
Unless something extreme happens, however, it is unlikely that we would see significant impact on the core underlying factors that drive value in real estate, notably economic growth and demand outpacing supply.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
