With the start of the new year, I decided to look into the moods surrounding the American real estate market (housing sector in particular) and determine the trends that will, according to the governmental agencies, top real estate and financial experts, shape the behavior of its actors.
While some of the experts expect the housing market to be one of the driving factors of the rising economy and contribute significantly to the country’s GDP, some of the complications, such as the tight lending standards and hesitant general contractors who went through the recent crisis and aren’t willing to venture upon the expansion of their business or renew the operation they’ve put on pause, will restrict the broader development of the sphere. Other housing forecasts enumerate the factors proving the steady growth along with the moderation of the market. and its almost full recovery from the 2008 crisis.
So, let’s see what the home buyers, sellers, agents and other subjects have to expect from the 2017 real estate market.
7 Real Estate Market Trends To Watch in 2017
1. The market should be good in 2017
Let’s start with the positive note, as most experts strongly believe that 2017 won’t bring any major real estate market crashes. On top of that, they’re giving promising forecasts regarding the new homes supply, estimating that approximately 160,000 houses will be built throughout the year. The sales of the existing properties will remain at a steady rate as well.
2. Hopes up by Donald Trump?
Donald Trump winning the 2016 presidential election will influence the market as well. His intent to draw businesses back to the U.S. and help people deal with their student loans by forgiving them after 15 years will hopefully give a chance to the middle range general and remodeling contractors to keep their business on its feet, give a development spirit to the market and encourage more Millennials to buy their first homes by improving their credit history and financial situation in general.
This should contribute to the improvement of the situation on the housing market, as well as create a rising demand for existing and new properties’ sales. But these prospects won’t be clear until the actual decisions are made.
3. Mortgage availability
Real estate experts have significant hopes for the banks to open up to the wider range of homebuyers and lend more freely to them in 2017, improving the mortgage availability and the process of receiving the housing credit a lot easier and faster. That’s due to the stated priorities of the new administration and the general mortgage trends observed in 2016. Clearly, this trend is quite uncertain, but really promising as well.
4. Prices and interest rates are going up
Housing prices will continue growing, but, as opposed to the 4.9% growth rate that was estimated earlier in 2016, the 2017 house price rates are expected to reach 3.9%. The higher confidence of homebuyers, the lower unemployment numbers and the stronger housing demand will contribute to the slower increase in the prices. The Western part of the country will go through the most significant price growth.
On top of that, the affordability of the real estate will be undermined by the mortgage rates going up (as triggered by the results of the U.S. elections and Trump’s economy growth plus tax reduction promises). And, while the promises are still just promises, the Federal Reserve is already bumping up the short-term interest rates by 0.5%, anticipating three more interest rates increases during 2017.
Thus, if you’re already a mortgagee, you might want to negotiate with your mortgage holder to make your rates fixed.
5. Millennials – main 2017 homebuyers
This generation, which constitutes a large portion of the U.S. population, has reached the point of the life where most people are ready to settle down, own some sort of housing and start a family.
With the student loan, credit availability and tax reduction promises, higher job security and lower unemployment, more and more Millennials will be able to buy homes in 2017. The fact that approximately a half of the homebuyers are under 36 now proves the trend will remain strong in the year that’s just begun.
6. New homes’ construction is at a rise, but the homes are getting smaller
This perspective is quite positive for the general contractors and homebuilders, as an increasing number of people are willing to build rather than buy. Even though the growth rates (just like throughout the industry) don’t appear to be too impressive, along with the trends mentioned above, they’ll certainly give a kick to the construction business owners, who’ll roll their sleeves up and start groundbreaking a bit more in 2017.
On the other hand, the average square footage of new houses is going down. This trend reflects the demand for homes closer to the city centers, where the tight space and high lot prices don’t leave too much room for the customers to build, as well as the growing Millennials’ demand for the affordable starter homes.
7. Shift to the inland
The ‘location shift’ becomes a lot clearer, as a lot of Millennials are seeking for their first homes and buying them in Midwest and ‘inland’, where the real estate and living in general are more affordable than in the coastal areas (the crazy demand and historically low supply make coastal real estate markets extremely competitive and housing prices – more and more ridiculous).
Additionally, the fact that the prospective real estate price growth rate is said to be the lowest in those areas, especially in the smaller towns, will make the Midwest and inland housing markets more popular among the Millennials and starter home buyers too.Are you thinking about buying a house or investing in real estate? Are you an agent enrolled into the real estate sphere? Are you going to sell your property in 2017? How did the situation on the market and the current trends influence your decisions and choices? Make sure to let me know in your comments.