Real Estate Trends to Understand for 2017
2016 was a prosperous year for the housing market with interest rates at record lows that had not been seen since the 1950’s. Appreciation values exceeded expectations and we are finally beginning to see light at the end of the housing recession tunnel. Also, more millennials became homeowners with the FHA first time home buyer grants and the incredibly low-interest rates mentioned previously. With that being said, here are some Real Estate trends you want to take note of for the year ahead:
Home prices will continue to rise
2017 will have similar appreciation like 2016, however, it will be more gradual. According to a recent Forbes article, there will be around a 5.3% increase in median home prices this year, which is no major change from the 5.5% increase in 2016. It is important to recognize that the home buying demand is already higher at the beginning of this year than it was last year.
Supply will increase, but not significantly and affordability will worsen
With wage growth, underway in America’s big cities, many more renters and even current homeowners are flocking to take advantage of the low-interest rates that are still in place. However, the issue at hand is that the supply of low to-moderate-priced inventory is still low. With this relationship between wage and affordability, there has become a mismatch in the housing market. While supply will rise in the following months, it’s still expected to remain historically low.
Mortgage rates will be volatile
What does this mean for you? The end of 2016 we saw mortgage rates increase by about a .25% following the presidential election which was only the second hike in a decade. Experts are saying that the Federal Reserve is looking to have three more increases in interest rates in 2017. While you should not panic, if you are seriously considering purchasing a home, it would be in your best interest to make the decision sooner rather than later.
Credit availability MAY improve
With a new administration in office, there has been much talk from President Trump and his team that they would like to roll back much of the post-crisis financial regulation laid out in the Dodd-Frank Act. What this could mean is that banks would be more able to lend freely to buyers. It is not certain that this is the direction that the banks will go but this would mean that there would be less strict rules in terms of credit. Another speculation is that President Trump would return government-controlled mortgage companies Fannie Mae and Freddie Mac to the private sector.
Millennials and baby boomers will be the big buyers
With more jobs being created for 25-to-34-year-olds, it only makes sense that this age group would be the most likely candidates to enter the home buying arena. The oldest of the millennials are pushing into their mid-30s and are beginning to settle down and start families. Some, who are already homeowners are looking to buy larger homes to fit their growing family, while others are understanding the benefit of building equity rather than paying rent. Baby boomers, with the oldest entering their late 60s, are looking to downsize and settle into retirement. 2017 will continue to see this trend rise just like it had in 2016.
There’s much to be hopeful for in the year ahead in regards to the real estate industry. The past several years have made positive progression and it’s expected that the year ahead will continue that climb. With all growth, there may be some growing pains along the way. The most positive possible trends for the year ahead will be that home values will likely see a healthy amount of appreciation and credit availability may improve. The negative side that’s predicted is that mortgage rates may fluctuate (upwards) and the housing inventory may remain low (creating more demand and appreciation for current owners but worsen affordability). If you’re a millennial (the largest demographic to be purchasing a home), ready to buy your first home, be sure to start your search right here at Homes.com.