2016 was one heck of year! With unprecedented political upheaval, international instability and a general sense of social change, many people are now wondering what will 2017 bring? Specifically, what is in store for us and our most valuable investments? Our real estate.
- Prices Will Continue To Increase—But Not So Quickly
Last year home prices increased at an above-average pace of 4.75 percent, which is promising if you are selling your home. That increase is expected to continue in 2017 and are predicted to reach the median price peak (set a decade ago, in April 2007) this year in November 2017. This is according to the latest quarterly Zillow® Home Price Expectations (ZHPE) Survey sponsored by Zillow and conducted by Pulsenomics LLC. Estimates based on the survey of 111 expert panelists, including many of the nation’s leading housing economists and researchers said they expect home price appreciation to be at almost 5 percent by the end of 2016 (which it was), and slow down to 3.6 percent by the end of next year. On average, panelists said they expected home values to end 2016 up 4.75 percent year-over-year. A bump in expectations, up from an estimate of 4.5 percent annual growth the last time the survey was conducted in July.
In short, it seems prices are likely to continue their upward tick, but at a more conservative pace in 2017.
- Interest Rates Will Go Up
In December, the Federal Reserve implemented the second interest rate hike in a decade. The 25-basis point move left rates low by historic standards and haven’t yet, impacted mortgage rates greatly. However, the Fed’s policy makers indicated that they anticipate three hikes in 2017, which could have a larger effect. That is up from the two hikes, officials originally projected before Donald Trump was elected. So, if property owners had a chance to refinance in 2016 and chose not to, they may regret that decision in the future.
- Rentals Will Be More Affordable
According to the Urban Land Institute’s October 2016 Real Estate Consensus Forecast, apartment rental rate growth is expected to moderate in the next three years to 3.5% in 2016, 3.0% in 2017, and 2.9% in 2018, with the 20-year average growth rate evening out to 2.8%.
“Renters should have an easier time in 2017. Income growth and slowing rent appreciation will combine to make renting more affordable than it has been for the past two years,” said Zillow’s chief economist, Dr. Svenja Gudell, in the release. This is good news for those who aren’t ready to get into their own mortgage yet.
- Rise in Development Will Relieve Some Of The Demand
As we all know the housing costs have been rapidly increasing following the recession, but the coming year should bring some relief to that demand. The National Association of Home Builders predicts 1.24 million housing starts in 2017, compared to the projected 1.16 million starts in 2016.
It should be noted though, that this “development is trending to denser development of smaller homes close to public transit and urban centers”, according to Zillow’s 2017 Predicitons. In other words, continuously growing property values means many homebuyers and renters alike will have to choose between prime location, space and affordability.
- Homeownership Will Increase
More millennials will become homeowners, driving up the home ownership rate. Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics in the US.
According to the National Association of Realtors, in 2015 first-time buyer purchase hit a 30-year low of 32 percent. Zillow says nearly half of all buyers in 2016 were first-time buyers. (NARS most recent Profile of Home Buyers and Sellers reported an uptick to 35 percent in 2016, the highest since 2013, while NAR also said that those under 35 made up 61 percent of first-time buyer transactions in 2016.)
This is bound to be a year fraught with big change and is still uncertain at best. However, it is well documented that real-estate is always a good investment and if you are considering this exciting venture, please make sure to contact a real-estate professional to guide you through! Happy New Year to you and yours!