At the beginning of 2016, it appeared that the housing market would see an increase in building new homes, which did not come to fruition. The year also saw home prices appreciate at a higher level than expected and near record lows for mortgage rates.
Overall, 2016 was a decent year regarding housing. But what about this year? What is the housing lookout for 2017? We’ve put together a list of expectations, which follow:
- Housing prices will continue to climb, but slowly. Because demand for homes is higher now than it was a year ago, it is expected that gains will slow down.
- Affordability is not improving. While wages are expected to increase for workers in big cities, affordable homes for those with a median income is going nowhere. There continues to be a shortage of homes in the low/moderate price range, and that, along with rising mortgage rates, is an issue.
- More homes are being built. Late in 2016, construction slowed on new projects but the overall trend in home construction is positive. The average rate of new home groundbreakings a year ago was 1.163 million and that is expected to continue in ’17.
- Medium-sized cities are on the rise and younger people are attracted to those cities because housing is more affordable. Raleigh, N.C., for example, has seen building permit issuance increase significantly over the last five years as younger adults are flocking there to take advantage of lower costs.
- Mortgage rates will be a bit fickle. Experts’ opinions vary greatly on mortgage rates with estimates for a 30-year fixed rate ranging between 3.75 percent and 4.6 percent. However, the Fed’s policy makers look to be predicting three hikes this year, which could have a greater effect.
- Credit availability could improve. President Donald Trump is looking to roll back a great deal of the Dodd-Frank Act, which could open up banks to lend more freely to buyers. Trump could also return Fannie Mae and Freddie Mac to private control, a move which some economists are excited about, while others are concerned it would only further limit who would qualify for credit purchase a home.
- Millennials purchasing homes/renting on the rise. This age group of people born about 1980 is the largest adult generation and they make up the largest part of the workforce. Experts feel the Millennial, looking for more affordable homes, will move into inland markets from the coasts.
- Sellers have the edge over buyers. A year ago homes were on the market for an average of 52 days and with demand expected to increase, it is expected they’ll go even faster in 2017.
- Uncertainty over policies. In the short term, President Trump’s pledges to spend more on infrastructure, to cut taxes and to change immigration could have a significant impact on the housing market. Over a longer period of time, however, opinions vary about the impact.
- Foreign buyers still play a key role in the housing market. Because there are so many foreign buyers with plenty of money buying homes in bigger cities in the U.S., prices continue to increase in cities like Los Angeles and New York.