SANTA CLARA, Calif. – Nov. 30, 2016 – Next year’s housing market will see slow yet moderate growth, a changing composition of homebuyers and a post-election interest rate jump that could price some first-timers out of the market, according to the realtor.com® 2017 housing forecast.
Realtor.com’s 2017 housing forecast
The 2017 national real estate market should slow compared to the last two years. Realtor.com predicts that home prices will increase 3.9 percent, and existing home sales will increase 1.9 percent to 5.46 million homes. Interest rates are expected to reach 4.5 percent due to higher expectations for inflationary pressure.
The homeownership rate will stabilize at 63.5 percent after bottoming at 62.9 percent in 2016, and new home sales should grow 10 percent, while new home starts will increase 3 percent.
Realtor.com’s forecast is based on GDP growth of 2.1 percent, a 2.5 percent increase in the consumer price index and unemployment declining to 4.7 percent by the end of the year.
Prior to this month’s election, demographics and an improving economy were laying the foundation for a substantial increase in first-time buyers in 2017, but following mortgage rate increases over the last few weeks, realtor.com now predicts first timers will face new hurdles as they navigate the qualification and buying process. It predicts the higher rates in anticipation of stronger economic and wage growth next year, both of which favor buyers. However, higher rates will make qualifying for a mortgage and finding affordable inventory more challenging.
“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,” says 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.”
Top housing trends for 2017
1. Millennials and boomers will dominate the market –– The housing market will be in the middle of two massive demographic waves – millennials and baby boomers – that will power demand for at least the next 10 years. Although increasing interest rates prompted realtor.com to lower its prediction of millennial market share to 33 percent of the buyer pool, millennials and baby boomers will still comprise the majority of the market IWC Replica Watches. Baby boomers are expected to make up 30 percent of buyers in 2017.
2. Midwestern cities will continue to be hotbeds for millennials – Midwestern cities are expected to continue beating the national average in millennial purchase market share in 2017. This year, average millennial market share in five of these markets is 42 percent – far higher than the U.S. average of 38 percent.
3. Slowing price appreciation – Nationally, home prices are forecast to slow to 3.9 percent growth year-to-year from an estimated 4.9 percent in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percent point. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percent or more with Lakeland-Winter Haven, Fla., Durham-Chapel Hill, N.C.; and Jackson, Miss., undergoing the biggest shift to slower price appreciation.
4. Fewer homes on the market and fast moving markets – Inventory is currently down an average 11 percent in the top 100 metros in the U.S. The conditions limiting home supply are not expected to change in 2017. Median age of inventory is currently 68 days in the top 100 metros, which is 14 percent –11 days – faster than U.S. overall.
5. Western cities will continue to lead the nation in prices and sales – Western metros are forecast to see a price increase of 5.8 percent and sales increase of 4.7 percent.
Top 2017 housing markets
Despite a more moderate housing market overall in 2017, strong local economies and population growth will continue to fuel the nation’s top markets. The realtor.com 2017 top 10 housing markets based on price and sales gains are:
1. Phoenix-Mesa-Scottsdale, Ariz.
2. Los Angeles-Long Beach-Anaheim, Calif.
3. Boston-Cambridge-Newton, Mass.-N.H.
4. Sacramento–Roseville–Arden-Arcade, Calif.
5. Riverside-San Bernardino-Ontario, Calif.
6. Jacksonville, Fla.
7. Orlando-Kissimmee-Sanford, Fla.
8. Raleigh, N.C.; 9. Tucson, Ariz.
10. Portland-Vancouver-Hillsboro, Ore.-Wash.
These top 10 markets are forecast to see average price gains of 5.8 percent and sales growth of 6.3 percent, which exceeds next year’s anticipated national growth of 3.9 percent and 1.9 percent, respectively. But when compared to last year, prices in eight of the top 10 markets are expected to decelerate with only Los Angeles and Tucson, Ariz. showing stronger growth than last year.
© 2016 Florida Realtors®
Reprinted with permission. Florida Realtors®. All rights reserved.