2016 was another good year for the housing market. We saw strong gains in home values, and mortgage rates averaged about 3.5% for the year - the lowest since Freddie Mac started keeping track of this in 1972! This, an improving economy, and high demand drove big sales gains also. There were concerns that affordability could become a problem with the rising prices, but existing home sales still hit a high in November.
Since then, we’ve seen mortgage rates spike up sharply, and pending home sales are down a bit, so what do the experts think is on the horizon? Well, here are some things to watch for and trends to expect for the rest of 2017:
Continued growth in sales and prices, but at a slower pace. Home prices are projected to go up by about 3.9% nationwide this year, as opposed to 4.9% growth last year. The NAR (National Association of REALTORS) is forecasting about a 1.9% increase in overall homes sold versus 2016. Overall, this is likely a good thing, as slow, stable growth will allow incomes to catch up to prices and help with affordability.
Mortgage rate increases. Mortgage rates rose to end last year, and are projected by many to reach 4.5% for a 30 year fixed in 2017. What does this mean? Well, it could slow down demand a bit (part of why most are expecting slower growth in sales), but more importantly it means that if you’re thinking about buying, make sure to lock in a lower rate while you can!
Baby boomers and Millennials are still the biggest influencers. People will continue to talk about and focus on these two demographic groups of buyers / homeowners, as they represent large numbers, and are experiencing the types of life changes that affect real estate, like marriage, having kids, retirement, etc. Also, trends show that Millennials seem to especially drive home sales in the Midwest or ‘heartland’ states right now, as they seek more affordable areas.
Construction still needs to catch up, but will make some gains. There are fewer homes available for sale in 2017 (and they are selling faster than last year’s averages). This will continue to slow overall sales somewhat (especially for first time buyers), but the good news is new home sales are expected to increase 10 percent this year while new home starts are predicted to rise 3 percent.
The West leads the way. In the West, new home starts may rise more than 10%, and both price growth and sales growth are expected to lead the country, well above the projected national averages for the overall market this year.
So that’s what we see and what experts are predicting. What do you think, and what impact do you think these factors may have long term? Contact us to talk about these trends or about any of your Real Estate needs. We’re looking forward to helping all our clients make the most of this year!