The year 2016 marked one of the best years for the real estate business since the recession. New home sales scored the highest, while interest rates remained near historical lows. For the past 7 years following the most recent recession, the housing market has been slowly and steadily growing as more jobs are being created. Housing market predictions 2017 highlight further the growth that the economy has witnessed and continues to witness. We provide you with them.
Housing Market Predictions 2017: Mortgage Rates Will Continue to Go Up
Two major events that have caused fluctuations in mortgage rates are the Brexit and the Donald Trump Election. The Brexit, or the British Exit, happened when the UK decided to leave the European Union in June 2016. The British pound consequently plummeted falling to its lowest level against the dollar in 30 years. Foreign real estate investors started to sell their properties in the UK and look elsewhere. This has lowered mortgage rates given the competition over a smaller pool of borrowers. As mortgage and interest rates declined, people have become more at ease lending money. Following the Brexit and upon the election of President Donald Trump in November, things turned around. The mortgage rates for the first time in the last two years reached 4%.
Housing market predictions 2017 conclude that the mortgage rates will continue to rise. It is important to note that though this will decrease new home sales, it will further encourage the remodeling of existing homes. Homeowners who scored a home purchase with a mortgage below 4% are likely to remain in their homes. This pattern has been apparent in 2013 when rates briefly rose. However, given the increasing employment and moderation of wages, the real estate market is set for growth.
Housing Market Predictions 2017: Prices Will Continue to Rise
The country had witnessed a substantial increase in building and construction, years 2004 through 2007. However, years 2007 onwards have witnessed a decrease and shortage of new home builds. Real estate property inventory in 2016 dropped down to an average of 11%. The low inventory/shortage of housing has further caused home prices to appreciate. The shortage of homes, moreover, shows an apparent demand for housing that’s not yet being met. The high demand and low supply means higher prices. In fact, the housing market predictions 2017 expect median home prices for both existing and new homes to increase by 3.7% and 2.7%, respectively.
Housing Market Predictions 2017: More Millennials Will Become Homeowners
Housing market predictions 2017 show that both millennials and baby boomers will drive demand in the housing market for at least the next 10 years. Each of the two groups – millennials and baby boomers – is estimated to have a 30% share of the buyer pool. Millennials have beaten the national average of home purchases in the following cities: Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis, Minnesota. In 2016, the average millennial market share in these markets hovered at around 42%. This is higher than the US average of 38%. We further expect this trend to continue in 2017.
Housing Market Predictions 2017: There Will Be Growth in Construction
Given the increasing demand and the low supply, new constructions efforts are expected to increase in 2017. Total construction starts are forecast to rise by 5% to $713 billion. Housing market predictions 2017 estimate gains of 8% for both residential and nonresidential building and 3% for nonbuilding construction. The growth across specific sectors is outlined as follows:
- Single Family Housing: US housing starts are forecast to grow substantially in 2017 year, particularly single family homes which will rise about 30%. This is due to better access to home mortgage loans, job growth, the low mortgage rates, and the increasing market share of millennials. This means that more renters will become homeowners over the next decade.
- Multi family Housing: Housing market predictions 2017 expect multi family housing construction to fall by 10.7% to 343,000. A trend that has peaked in 2015 now seems to experience a slowdown. As more real estate investors have recently penetrated the housing market, they have become more proficient to find ways to maximize earnings. Ideally, a real estate investor who wishes to make the most gains will buy a single family property, divide it into subunits, and rent it out to more tenants. This way the real estate investor maximizes the available resources to generate more return on investment rather than renting out one unit in a single family house.
Additionally, commercial and institutional buildings are expected to increase, thus creating more demand for housing. Presidency aims to drive job creation efforts. Improvements have been apparent in the office and store construction. As more demand is being created, more institutions are needed. K-12 construction facilities have grown and will continue to do so in 2017. Additionally, we expect more growth across the amusement sector. In Austin, Texas, for example, the government is making initiatives in transferring the excess land it owns to facilities to serve the public.
Housing Market Predictions 2017: Affordability Will Slightly Decrease
Although 2017 predicts job growth and wage salaries to continue to rise, affordability of homeownership will worsen. The median home price is expected to increase by about 10% in 2017, reaching $200,000. For the past four years, the available inventory of affordable homes has declined. The shortage in low- to-moderate-priced inventory and rising mortgage rates have discouraged potential homebuyers and made the housing market less affordable. Unfortunately, 2017 will not be much different.
The aforementioned US housing market predictions 2017 are to key to understand as you get through the year. If you are looking to invest in real estate this year, make sure you research and study the US real estate market relentlessly. Visit Mashvisor to read more about real estate and the housing market. When you are ready to purchase an investment property in some of the most prosperous US real estate markets, search through the thousands of properties available at Mashvisor. The rental property calculator will provide you with the most important numbers such as expected rental income, CoC return, cap rate, and occupancy rate.