With the new year well underway, it’s time to take note of the ways in which the housing market has changed since the last buying season, and how certain trends are expected to develop in the months ahead. Issues such as shifting affordability and tight inventories will likely continue to weigh heavily on real estate sales figures on the local, state, and national levels, and they’re issues agents will have to keep in mind when working on their marketing and business plans for 2017.
For instance, it’s expected that existing home sales will tick up about 1.9 percent – and those for new homes will jump 10 percent – over the course of 2017, despite declining affordability, according to the latest projection data from the National Association of Realtors. Indeed, it’s believed home prices will rise about 3.9 percent in the months ahead, while mortgage rates could climb as high as 4.5 percent over the same period. And because of these changes, it’s expected that the national homeownership rate will hit 63.5 percent, up slightly from the all-time low observed last year (just 62.9 percent).
Trends to monitor
The two age groups that are most likely to buy in the year to come are – perhaps not surprisingly – baby boomers and millennials, the NAR added. And the latter group seems to be particularly interested in buying in mid-sized cities in the Midwest, such as Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis. Already these cities have larger shares of millennial homeownership than average, and that’s a trend that will probably continue to grow.
What could be problematic for existing home sales, though, is that rising rates might deter current homeowners from selling en masse, even as prices rise. As such, many markets could see inventories continue to shrink or at least stay at their current low levels in the year to come.
“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 Jonathan Smoke, chief economist for realtor.com. “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.”
Meanwhile, it seems that the local housing markets most likely to flourish in the year ahead are suburban regions, according to MarketWatch. Indeed, about 80 percent of all residential growth is expected to happen in these communities in particular, up from the rate of 71 percent seen from 2010 to 2015. Meanwhile, urban areas will only see about 15 percent growth during this time, leaving the remaining 5 percent in more rural areas.
The more real estate professionals can do to get out in front of these trends and make sure their approaches in local markets meet shifting expectations among buyers and sellers, the more likely they will be to enjoy long-term success in 2017 and beyond.
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