With Christmas around the corner and 2016 coming to a close, thoughts of what the New Year 2017 will bring abound. Also, as President elect Donald Trump prepares for White House many, whether positive or negative, expect to see shifts in the economy – particularly in regard to his famed industry of real estate. So what does the future year hold for real estate? Here are the top 3 trends experts are predicting in 2017:
Low mortgage rates no more
Since the recession mortgage interest rates have remained steadily low. According to Freddie Mac, the lowest average mortgage rate on a 30 year fixed mortgage in 2016 was 3.44% - an historically unheard of rate and not one that is expected to stick around. Windermere Chief Economist, Matthew Gardner told Inman news, “I don’t believe we’ll see any pullback until after the inauguration, but even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror. My forecast is for the 30-year fixed rate to rise above 4.5 percent by year’s end, and worst case scenario knock on the door of 5 percent.”
What does this mean for a buyer pocket book? An increase from the average mortgage rate of 3.7% to 4.5% as Gardner predicts would cause an annual increase of $1,104 on a $200,000 loan. So if you are looking to buy a home, now is the time.
More Millennial home buyers
Whether the reason for delayed home purchase is due to a combination of educational debt and/or the Recession one thing is for sure – the Millennial or Generation Y will be purchasing in 2017. According to Realtor.com, 33% of first time home buyers next year will be in the 18 to 35 age range. On top of that these Millennial home buyers will not be purchasing what is typically categorized as entry level housing. Senior vice president and chief economist of Fannie Mae, Doug Duncan told Inman news, “Builders are seeing millennials, whose first home they are purchasing used to be the first move-up home, sort of leapfrogging that entry-level…they’ve just delayed buying until they could get the house they wanted, the more mid-sized or first move-up house.” Other delays of purchase until now also point to Generation Y’s slower income appreciation and the fact that they have taken longer to “settle down” marry and have children. The Washington Post reported, “the average marrying age for first marriage is 27 for women and 29 for men; in urban areas such as New York and Washington, those averages are higher.” Millennials just haven’t been in a rush to make larger commitments at an earlier age like previous generations – and purchasing a home is one such commitment. Until now.
Housing inventory will continue to be low in 2017. In a healthy market, 6 months is typically the mark of real estate inventory; however, the National Association of Realtors reports housing supply across the nation remains at a 4.3 months supply. Continued scarcity of inventory will likely lead to rising home prices and greater seller leverage in the market. On the other hand, the increasing mortgage rates predicted next year might also discourage existing homeowners from selling. Mark Fleming, chief economist at First American poses an interesting question, “How do we address the fact that the existing homeowner, the largest single source of housing supply, has a built-in, financial disincentive to make that supply move?” Selling a home with a mortgage interest rate of 3.5% and purchasing a new at 4.5% making the “move up” home less appealing for current homeowners.
Current Houston Stats as of December 14, 2017
Source: The Houston Association of Realtors:
|CATEGORIES||NOVEMBER 2015||NOVEMBER 2016||CHANGE|
|Total property sales||5,676||6,890||21.4%|
|Total dollar volume||$1,420,028,031||$1,827,990,565||28.7%|
|Total active listings||33,298||36,151||8.6%|
|Single-family home sales||4,651||5,706||22.7%|
|Single-family average sales price||$262,811||$281,671||7.2%|
|Single-family median sales price||$205,000||$222,000||8.3%|
|Single-family months inventory*||3.4||3.6||0.2 mos.|
|Single-family pending sales||5,019||5,799||15.5%|
* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market.
“8 experts predict what the 2017 housing market has in store” https://www.inman.com/2016/12/06/8-experts-predict-the-2017-housing-market/
“Monthly Average Commitment Rate And Points On 30-Year Fixed-Rate Mortgages Since 1971” http://www.freddiemac.com/pmms/pmms30.htm
“Realtor.com® Forecasts Post-Election Economy to Result in Higher Mortgage Rates While Housing Delivers Slower Gains in 2017”http://news.move.com/2016-11-29-Realtor-com-Forecasts-Post-Election-Economy-to-Result-in-Higher-Mortgage-Rates-While-Housing-Delivers-Slower-Gains-in-2017
“5 Real Estate Trends to Watch in 2017” http://www.marketwatch.com/story/5-real-estate-trends-to-watch-in-2017-2016-11-15
“10 Real Estate Trends to Watch in 2017” http://www.thefiscaltimes.com/2016/11/22/10-Real-Estate-Trends-Watch-2017