Look Ahead
It’s that time of year when everyone takes out their crystal balls and peers into the future, hoping to determine what 2017 holds for the real estate market nationally. While the predictions differ, economists and other experts see a lot of the same things coming down the road:
Existing home sales will continue to climb, and economists are putting the national number at more than 6 million. The National Association of REALTORS® predicts home sales will reach 6 million in 2017, while Fannie Mae and Freddie Mac say 6.2 million and the Mortgage Bankers’ Association says 6.5 million. For context, NAR predicted 2016 would see 5.8 million, and while numbers aren’t final yet, sales were on target to hit that number by the end of the year.
Home values will grow. Zillow is predicting home values will grow 3.5 percent, according to its Home Price Expectations survey, while Realtor.com suggests a 3.9 percent growth. Ten-X (formerly Auction.com) and ATTOM Data Solutions, owner of RealtyTrac, put values between 3 and 4 percent as well. All these predictions are slightly slower than 2016’s near 5 percent growth.
Mortgage rates will increase—at least, a little. While many experts have been predicting the long-awaited upward march of mortgage rates for years, there is a general consensus that we’ve seen the bottom. Freddie Mac economists predict the 30-year fixed mortgage rate will average 4.1 percent (they already hit 4.3 percent in 2016). While that may bring more buyers to the surface hoping to take advantage of rates before they shoot up, it may also dampen some markets where affordability is already an issue.
Some markets may see price corrections. While national growth is still expected, interest rates and affordability issues will cause price appreciation in certain markets to weaken, particularly in markets like Denver, Seattle, Portland, Austin and many parts of California, where buyers were already skipping over the hottest urban zip codes and heading to the outskirts of town, according to both HousingWire and ATTOM Data Solutions. The homeownership rate will stabilize at 63.5 percent, according to Realtor.com’s prediction.
The homeownership rate bottomed out this year at 62.9 percent, the lowest rate since the U.S. Census Bureau began tracking it in 1965. Many economists and experts are predicting more first-time home buyers will jump on the homeownership band wagon, led by millennials and Gen Y.
However, inventory woes aren’t likely to change. Despite climbing home prices, homeowners still aren’t overly eager to plant a “for sale” sign in the yard, mostly because they don’t want to be on the other side of the coin. According to a survey by down payment protection service ValueInsured, 63 percent of all homeowners think current home prices are inflated and a bubble is looming—and they don’t want to get caught buying a new property that immediately loses value. This was also a big year for refinancing. Freddie Mac reported $1 trillion in refinance originations last year, which tends to mean homeowners stay put, at least for a few years, after completing the process.
