Housing Market 2017 Forecast
There is one truth when it comes to forecasting the housing market. Unlike other markets, the housing market will continue to be active, no matter the economic conditions or interest rates. Families grow and change, people get new jobs, marriages, individuals move closer (or away from) their families, they retire, and they graduate. All of these are reasons that someone might change homes or purchase a home for the first time. None of these reasons are going to change. People are not going to stop participating in the real estate market. While the real estate market isn't always a good investment for making money, it is always going to be an active market here in the US. Americans feel that owning a home has value above and beyond the simple financial growth of a particular property. That being said there are some emerging trends that will shape the housing marketing in 2017 and beyond.
After the housing bubble burst in 2008 many home builders were left holding a lot of property without a lot of buyers. This forced them to slow their building and fewer new homes being built has been an ongoing trend for a few years now. However, as the market stays strong and the general economy grows slowly, but steadily, these builders are now investing more and more into new home builds.
These homes are often in planned communities, already popular neighborhoods, or suburbs and are an attractive choice for many first time home owners. Because builders often build in already popular areas, the rise of new builds will positively impact the inventory of given housing markets, giving buyers more choices and the ability to buy sooner in a desirable area.
Newly built homes are also a reflection of the continued popularity of the real estate markets in mid-sized cities, as many middle-class families become priced out of larger metropolitan areas like New York, San Francisco, and Miami. Cities like Columbus, Ohio, Raleigh, North Carolina and Denver, Colorado, are all on the rise and all are seeing many new communities built in and around their metro areas.
But don't expect an enormous boom in new home builds. The labor market is still very tight, and skilled workers are in even shorter supply. As the new administration pushes for more stringent immigration reforms and continues their deportation efforts, builders expect projects to take longer than previously estimated.
After interest rates hit historic lows in the spring of 2016, they are finally set to rise again. The Federal Reserve raised interest rates in December 2016, and most of the Fed predicts that they will be raised as many as three more times in 2017. While this can seem abrupt for those who are relatively new to the market, experts caution not to worry. Even a mortgage rate of 4.5% is still quite low relative to historic rates.
These higher rates may make it slightly less affordable for people to purchase their dream home, but when taking other factors into account, like the cost of insurance and the relatively stable inventory and housing prices, these rates are still positives for both buyers and sellers.
Even as interest rates rise, mortgage availability will continue to grow slowly, but surely, due to somewhat loosened regulations. The Federal Housing Administration is likely to decrease the lending fees for first-time borrowers, as a tail end of an Obama era strategy to boost the housing market. This means that while rates might be higher, it will be slightly easier to obtain credit to buy a home, so buyers may be able to afford more home than they could have before. This balances out nicely with the interest rates, meaning that overall most consumers will feel little change in the end price per month from 2016 to 2017.
The Federal lending agencies Fannie Mae and Freddie Mac will also begin lending larger amounts to buyers of more expensive homes for the first time. This also increases the credit lines available to buyers and can help keep the housing market buoyant in 2017.
While experts do see changes coming for the housing market in 2017, overall the outlook is still bullish. With mortgage rates remaining comparatively low, loosening credit and newly built homes on the rise the US's real estate market is holding steady, with a modest and predictable increase to come in 2017.