2017 is going to be a deciding year for many reasons. First, there will be a huge shift in the U.S. economy, and that shift will most likely stem from the real estate sector – mainly because it contributes to 15% of the country’s GDP. While currently there hasn’t been a significant difference, as the year rolls, many experts believe that there will be a major shift in the real estate sector that will directly affect the economy. Here are 5 real estate trends that will shape up the market in the coming year:
Interest Rates Will Increase
On the 14th of December, the Federal Reserve announced a 0.5% increase in the lending rates overnight. Furthermore, it was predicted in the rate-setting meeting that in the coming year, the rates will most likely increase three-fold. While this may seem like a very little amount right now, considering how rapidly the rates have increased following the elections, things don’t look good in the future. The mortgage rates will most likely increase, making it difficult for homebuyers to purchase the house that they want. Where many experts are pessimistic about the rising rates, some also believe that while it may seem scary now, things might not be as bad they appear. Quite a few experts predict that the rates might not jump more than 4.3% on the 30-year fixed mortgage. So, you can still purchase your dream house in Spring Hill, Tennessee.
Availability of Mortgage Credits
While the rates will most likely increase in the coming year, there is also a possibility that mortgage credit will become more widely available. It is also possible that the Federal Housing Administration will most likely lower it’s charging fee for first time buyers, continuing the trend set under Obama’s presidency. Some government owned mortgage companies might start to back larger mortgages for first time buyers in over a decade. For people who want to make purchases in an expensive market, this will give them a chance to finance their purchases.
More New Homes Will Be Built
Although many builders backed out following the November 2016 raise, many experts are of the opinion that the construction of new homes will continue to steadily grow in the coming year. In 2016, the average annual rate of construction reached 1.16 million, which was 5% more than the rate of 1.108 million observed in 2015. Many are positive that in the near future, the rates will continue to elevate.
Rise of Medium-Sized Cities
Medium-sized cities are a product of the many restraints that contractors have to face while building properties in the large cities such as New York and San Francisco. As the large cities become more cluttered along with rising mortgage rates, there will most likely be a steady increase in the rise of these medium-sized cities. Younger folks will most likely be more attracted to these mid-sized cities, as they will be more affordable and allow them to purchase a house that might be way out of their reach in larger cities. While these small cities might not have as many professional opportunities at the moment, that sector will rise as these cities become more popular.
The Numbers of Foreign Buyers Will Increase
Where the increasing rates have raised a lot of suspicions, there is a huge possibility that the number of foreign buyers will most likely increase. Most of these foreign investors would be from Asia. Parties would purchase property within the larger cities to store their wealth, depending on the state of their economy.
The Market Will Have Millennials and Boomers as Big Buyers
Mid-30s will be the greater age of those looking to settle down and buy their own houses. More jobs are being created for people of ages 25 to 34, and with rising wages, this age group is thinking of getting married and having children.
The oldest of the baby boomers, entering their late 60s, are also looking to settle down and move into a house as they are reaching retirement years. The last few years have shown a great number of baby boomers participating in the housing market. Most already own houses and are reluctant in selling them due to similar value outcomes.
The Value of Homes Will Increase
Home values will increase, although it will not be as high as last year – but the difference is slight. When the market took a boom and recovered from the housing crisis, there was a higher rate of value appreciation. But a normal appreciation rate will be seen for the next year as the slowing down of appreciation is inevitable.
Suburbs Will Have More People – Affordable Houses
Home prices will continue to rise and the majority of buyers will move out to the suburbs in search of affordable houses. Due to the housing bust, a greater number of people moved out to the cities, the prices dropped, and houses became cheaper. And now, people are seen living close to the city center, where they can reach amenities and neighborhoods within walking distance.
While in the current time, for the first time, there is not enough supply to satisfy the demand in the cities. As a result, most people will have to look further away from the cities for homes fitting in the perfect price range. In 2017, new homes will be even more expensive as builders will increase prices because of labor shortages.
Prices Will Continue to Rise in the West Coast
2017 will definitely leave the Midwest market on the home buyer’s side, but the West Coast prices will continue to rise. This part is where the most significant job growth has been seen, and population growth will eventually follow job growth. The results will be an increased demand of homes, thus, higher prices.