As 2016 quickly winds down, the question now on the minds of homebuyers and home sellers is what 2017 will portend for the residential real estate market in the United States…
Early on a Monday morning these are some points pondered by Hallmark Abstract Service with the thoughts from real estate industry giants Zillow and Realtor.com offered below.
- What impact on the real estate market, if any, will a Trump presidency have in terms of overall federal policy, loosening of regulations and the leadership at the U.S. central bank aka the Federal Reserve? For example will Janet Yellen be invited to stay on as leader of the Fed, will Dodd-Frank be reworked or dismantled and is the mortgage interest deduction at any risk of being reduced or abolished,
- Speaking of the Fed, will the U.S. actually experience the faster economic growth that the spike in interest rates and rise in the stock market have been predicting post-election? And will that growth force the Fed to push rates, including of course mortgage rates, even higher in 2017? And, if so, would the move off of the historically low rates that consumers have become so used to throw a monkey wrench into the interest rate-sensitive residential real estate market,
- In 2017 will the buy vs rent metric across the nation swing firmly into the buy camp or remain very different by region? And in high rent markets such as New York City and San Francisco will renters even be in a position to save the money necessary to make a move to purchase,
- Will the inventory of homes for sale, tight in a great many markets across the country throughout 2016, loosen in 2017? And, if so, what will increased supply in the face of potentially higher mortgage rates mean for prices,
- Will any geopolitical eruptions around the world impact our overall economy and by extension real estate markets?
Of course there are many other areas and factors we could discuss so for now, let’s read about what the people who get paid to forecast real estate market trends actually think about 2017.
These are the 2017 real estate market predictions from Zillow and Realtor.com with a nod to Ilyce Glink where they appeared.
Zillow and Realtor.com Residential Real Estate Market Prognostications!
Zillow 2017 Residential Real Estate Market Predictions
Zillow’s predictions for 2017 include:
- Cities will focus on denser development of smaller homes close to public transit and urban centers.
- More millennials will become homeowners, driving up the homeownership rate. Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States.
- Rental affordability will improve as incomes rise and growth in rents slows.
- Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump.
- The percentage of people who drive to work will rise for the first time in a decade as homeowners move further into the suburbs seeking affordable housing – putting them further from adequate public transit options.
- Home values will grow 3.6 percent in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values have risen 4.8 percent so far in 2016.
“There are pros and cons to both existing homes and new construction, and the choice for home buyers can often be difficult. For those considering new construction in 2017, it’s worth considering the added cost that may come amidst ongoing construction labor shortages that could get worse if President-elect Trump follows through on his hard-line stances on immigration and immigrant labor. A shortage of construction workers as a result may force builders to pay higher wages, costs which are likely to get passed on to buyers in the form of higher new home prices,” said Zillow’s Chief Economist Svenja Gudell.
Even as new construction gets more expensive, Gudell believes that “income growth and slowing rent appreciation will combine to make renting more affordable than it has been for the past two years.”
Realtor.com 2017 Residential Real Estate Market Predictions
- Millennials and Boomers will dominate the market. Realtor.com Chief Economist Jonathan Smoke believes that these two massive groups of Americans will dominate the housing market for the next ten years, as Boomers begin to downsize and then rent, and Millennials begin to buy the homes in which they’ll raise their families.
- Midwestern cities will continue to be hotbeds for Millennials, particularly in markets like Madison, Wisconsin, Columbus, Ohio, Omaha, Nebraska, Des Moines, Iowa, and Minneapolis.
- Slowing home price appreciation. As interest rates rise, affordability will fall, and home price appreciation will slow down.
- Fewer homes on the market and fast moving markets. There will be fewer homes on the market, but demand will hold steady in most places, meaning that home buyers had better be prepared to act fast or miss the opportunity to buy the homes they want.
- Western cities will continue to lead the nation in prices and sales. Western metros in the U.S. are forecast to see a price increase of 5.8 percent and sales increase of 4.7 percent, much higher than the U.S. overall.
“We don’t expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016. However, the 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year,” said Smoke. “With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market.”
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