The 2017 Housing Market Forecast

By every measure, 2016 was a good year for housing. More Americans recovered lost equity from the Great Recession and fewer investors competed with first-time homebuyers for houses. Yes, prices skyrocketed putting a damper on affordability, but if you’re a homeowner, appreciation is a good thing. With rising rents, many tenants decided to break their lease and sign a mortgage. First-time buyers returned to the market accounting for 35% of sales in October, the highest since 2013. But what should we expect in the coming year? Read on and take heed.

Higher Rates

Yes, interest rates are up. If you owe credit card debt, you will probably pay more in interest. If you have a Home Equity Line of Credit, you will probably see your payment increase. Mortgage rates, on the other hand, are not immediately affected by The Fed’s decision to raise the federal funds rate. Mortgage interest rates rose sharply just after the Presidential Election, to the highest point in two years, and those rates are expected to continue to trend upward. The Fed is expected to raise rates a few more times next year. The days of historically low-interest rates are over. Mortgage rates are expected to reach 4.6% in 2017, according to the National Association of Realtors. However, that doesn’t mean the housing market will go bust. Now, adjustable rate mortgages will become a viable option. Word to the wise: Lock-in your rate now.

Higher Rents

For those who say rising interest rates mean they should renew their lease, think again. Rents will continue to rise faster than income, according to the experts. Rents will continue to rise, but more slowly. Still, no one should expect renting to become a cheap alternative to buying. Yes, home prices are up, mortgage interest rates are up, but, if you can afford to buy, you can lock in your monthly housing payment for the long haul, and deduct the interest.

More Equity

Yes, home prices will continue to rise. From 2011 to 2016, median home prices have risen by 42%, according to National Association of Realtors. Expect that trend to continue, but not evenly. Some markets will see double-digit increases while others will see single digit increases. In the end, housing is appreciating and that’s good news for homeowners. Next year, home prices are expected to rise 5%, according to CoreLogic. For those who want to move up, now is the time to list it. Most markets are suffering from a lack inventory. That means your house will have less competition and hopefully, more offers.

Less Inventory

So what does it mean to have a low-inventory housing market? It means it’s a seller’s market. When there are fewer houses to choose from, multi-bid situations spring up. In 2017, for sale inventory is expected to remain “lean,” according to CoreLogic. Without new supply being built at the necessary levels, inventory will continue to suffer and prices will continue to rise. In 2016, there was just a 4.3 month supply of houses on the market, according to NAR. In a healthy market, there should be a six-month supply. It doesn’t look better for 2017. Low inventory levels hurt affordability and it’s the main reason home prices have outpaced income for the past five years, said Lawrence Yun, chief economist at NAR. The upside, houses sell faster in a low inventory market. The average market time was a mere 41 days in October 2016, according to NAR, down from 57 days in October 2015. Take the equity, list your house. Buy something newer, bigger, in a better school district. Get a bigger yard. In a low-inventory, high-equity market, you move.

Low Risk

There are more loan products to help buyers get into their first home now than last year this time. Between portfolio products like Guaranteed Rate’s Double Match program which allows the buyer to put down 1% and Guaranteed Rate contributes the remaining 2% for a 97% LTV mortgage, to Fannie Mae and Freddie Mac’s low-down payment options, buyers who can afford to buy, should. What to do if your credit isn’t perfect? Go FHA. Those who want to buy should find the product that let’s them get in, lock-in a rate, and become a homeowner, immediately.

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Author: Posted on Dec 17, 2016 by Chrystal Caruthers

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