With each new year comes new trends that we must stay on top of and this includes US real estate. 2016 was a year of surprises, but was kind overall to the US housing market. From prices skyrocketing higher than expected, to builders not building enough homes, to Millennials appearing as more likely candidates of homeownership. Let’s take a look at some of the trends that will help to define the US real estate market in 2017.
Housing prices continuing to rise but at slower rates. US housing prices are expected to continue to rise throughout 2017, but will do so at slower rates than the previous year. A couple of factors can describe this pattern. First, there is a slight increase in the supply of housing which will help to balance the market and essentially, slow the rate of price growth. Secondly, demand is stronger this year than the previous one, which adds fuel to the growth of prices.
Increasing supply, but not enough to surpass demand. As we just mentioned, there will be a slight increase in the US housing supply for 2017. Although, the supply increase is not large enough to offset the rise in housing prices. There will continue to be steady increases in the available US housing supply. However, it should be noted that the supply side will likely not reach the levels of demand that we are currently experiencing.
Increased competition among sellers. With an increase in supply, it means that home sellers will experience more competition from other sellers than before. However, this shouldn’t be a huge concern as the demand side of the market still outweighs the supply side. One outcome you can expect to see is that listed houses are expected to sell even faster than they did in 2016.
Volatile mortgage rates. There is a lot of uncertainty surrounding mortgage rates. A lot of this has to do with the uncertainty of policies on the agenda of the Trump administration. Overall, mortgages are expected to increase in the long run with a volatility in the meantime. One reason for this increase can be attributed to higher inflation rates. Since these higher inflation rates are combatted by increasing interest rates, this has a direct impact on mortgage rates – essentially making them more expensive.
Affordability will continue to fade. Affordability will continue distancing itself as a reality for many, especially first-time buyers. From the points already mentioned, we can see why this is true. With housing prices continuing to rise, it becomes even more difficult for first-time homebuyers to enter the market. Even more so when you consider the competition among properties that are more suitable for first-time homebuyers. Finally, combine all of this with the fact that mortgage rates are increasing and you’ll surely recognize the truth to this point.
Potential improvement in the availability of credit. There is particular speculation surrounding an increase in available credit as President Trump has made claims of pulling back previous regulations in the financial services industries. If it’s another situation like the period leading up to the recent financial crisis, lending could become much easier to come by for consumers.
Increasing volume of homeownership among Millennials. As Millennials continue to age and harness increased purchasing power, more and more of this generation will become first-time homebuyers. The same goes for Millennial renters.
Policy uncertainty. At this point, there is more focus on policy uncertainty than political uncertainty. Real estate is more likely to be affected by the regulations imposed by the Trump Administration as compared to other political ramifications. It is thought that many of the claims made by the Trump Administration will have positive effects on the housing market at best, and neutral effects at worse.
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