2017 Market Predictions – A reason to buy soon
Major new policies coming soon
The Trump administration ushers in three major policies that could significantly affect the long-term trajectory of the U.S. real estate market: infrastructure spending, tax cuts and changes to immigration policy. Next year, as these policies begin to take shape, their effect will mainly play out in new construction and mortgage rates.
The Housing market is expected to grow slower
The housing market will continue to grow, but at a slower pace due to affordability pressures.
Next year the new administration will lead a shifting U.S. economy. However, the percentage of homes in America’s cities that are affordable on the median income has declined the past two years and may continue to fall in 2017. We think there will be a shortage of starter homes for sale, even as the inventory for expensive homes improves next year. Existing homes sales should increase about 3% percent in 2017, compared to the estimated 3.4 percent increase in 2016. It looks like price increases will hold steady, because homebuyer demand is stronger now than it was at the same time last year, and because we foresee a small uptick in homes for sale. With no increase in supply in the most affordable third of the market, we expect most of 2017 increase to be in the most expensive end of the market. Sales would be stronger if there were more starter homes on the market to meet demand from millennial homebuyers. The lack of starter homes will keep sales growth weak next year. First-time buyer clients need to make sure they’re educated on the strategies they can use to win bidding wars and protect themselves in this competitive market.
2017 homes will sell the fastest on record
We expect 2017 to break the 2016 record as the fastest market on record, measured by the average number of days homes spend on the market before going under contract. This year, the average home stayed on the market just 52 days, 2017 is expected to be even less.
New-construction growth will slow in 2017
Single-family new construction increased by 9 percent in 2016, but it’s still much lower than historical averages due largely to labor shortages. Given that nearly one in four construction workers are foreign-born, stricter immigration policies from the Trump administration are likely to make the problem worse. Growth will likely slow to 6 percent in 2017. Unfortunately, this affects the availability of affordable starter homes the most, which means higher prices for first-time buyers.
Mortgage rates will increase
Mortgage interest rates are expected to increase. Already, the 30-year fixed mortgage rate has increased from 3.5 percent at the end of October to just above 4 percent following the election. Wall Street is now anticipating higher economic growth and inflation in 2017, and reshuffling to stocks from bonds. In general, when investors buy fewer bonds, bond prices fall (yield rises) which pushes up mortgage rates.
Begin your search...
Now you can .....