According to the National Association of Realtors Chief Economist, Lawrence Yun, national home sales are predicted to increase by two percent in 2017 and then an additional four percent in 2018. NAR believes existing home sales will surpass 2016 home sales by reaching 6 million over this year’s 5.8 million numbers. Prices are on track to rise at least 4% in 2017, fueled by more millennials entering the buying market, job gains, and on-track economic conditions supporting a “net positive for the housing market.” Yun also stated that 2016 is closing with the strongest home sales pace since 2006.
Millennials aren’t just buying condos or settling for entry-level properties. They want the move-up property and they have the funds to make it happen. NAR states that in 2016, 17 percent of buyers under age 35 were able to save enough for down payment within one year, compared to fourteen percent of all age groups.
Limited housing inventory levels still control affordability, but if new construction can keep up and meet the growing demand for housing starts then this issue could shift. Shortages in construction labor are being felt throughout the nation and limited land availability is also a contributing factor in new housing starts.
Yun expects a gradual rise in borrowers total costs going into 2017, ending at a 4.5 percent rise by the end of next year. This is not expected to deter first-time homebuyers, and Yun thinks this demographic will be at its strongest in 2017 than has been seen over the past decade. All of these forecasts are based on many factors and variables, including the overall health of the U.S. Economy and its GDP numbers. Chronic instability overseas can affect our market, but if this past month is any indication, investors and the general public are feeling confident in the overall economic health and stability of our nation.
The Wall Street Journal reported on November 30th that U.S. home prices have climbed back above the record reached more than a decade ago, closing the worst period for the housing market since the Great Depression. Home-price growth has outpaced income gains, making it more likely that the current rate of appreciation is unsustainable. According to The Wall Street Journal, home prices have grown at the inflation-adjusted annual rate of 5.9% since 2012.
CoreLogic is an analytics and business intelligence company that provides financial, property and consumer information to the public. They suggest that housing prices in the U.S. will rise by 3.5 percent through August 2017. In the long-term, Forisk Research (the leading data source on timber consumption and use) projects U.S. Housing starts continuing at 1.5 million per year to the year 2024.
Regionally, the California market is expected to cool, as affordability is an issue in many markets. A very large number of residents are leaving the golden state, creating hot markets in surrounding states, especially in the Pacific Northwest. In fact, housing market forecasts for 2017 suggest the Pacific Northwest will outpace the rest of the nation in 2017 for home-price appreciation.
If you’ve been sitting on the fence to lock in an interest rate, now would be the time to consider doing so. The Mortgage Bankers Association expects the average rate for a 30-year home loan to rise from 3.5 percent to 3.9 percent by the end of the first quarter of 2017. Although this is an educated prediction, similar predictions were made last year that did not come to pass and ultimately remains to be seen.
Rick Sharga, executive vice president of Ten-X, formerly Auction.com, (a real-estate auction site) said last month, “I don’t believe that there will be any significant changes to interest rates, at least in the near term, since the underlying fundamentals that have led us into a low-interest-rate environment haven’t changed.” Sharga sees a Trump presidency as being good for the housing and mortgage markets in the long term, saying, “He seems committed to bringing regulatory relief — and regulatory certainty — to the financial-services industry, which should make more credit available to average home buyers who have been locked out of the market by today’s extraordinarily tight credit standards.”
As a result, home buying should remain strong in 2017, which is good news for a market starved of inventory. “This is absolutely a seller’s market and has been for quite some time, and we do not feel Donald Trump’s win will negatively affect the market for those looking to sell,” said Nancy Dennis, a vice president at American Financing Corp., an Aurora, Colorado based mortgage lender.
Although an interest rate hike is not imminent, down the road interest rates could begin rising faster, especially if Trump’s economic-growth plans ignites inflation. “The accelerated economic growth and ensuing inflationary pressure could prompt a quicker pace of rate hikes that are potentially more aggressive than exhibited over the past year,” wrote John Chang, first vice president of research services at Marcus & Millichap, the largest U.S. real-estate brokerage firm, in a note to investors in November.
Some economists are surprised by the magnitude of the home-price gains in the recent years, given the more moderate pace of wage growth. Although no one can predict the future, all educated signs point toward a strong and healthy 2017 housing market.
If you’d like to know how much equity you have in your current home, consider giving The Mike Brown Group a call. Our agents are always happy to assist you by providing factual data so you can make an informed decision for all of your real estate needs.