Just like in past years there’s a lot of talk about real estate projections in the coming year. If you’re thinking of buying or selling a home in 2017 or just want to keep up with the trends you may be interested to learn more about what the experts have to say. So here is a brief synopsis on what’s being said about the 2017 real estate market.
Mortgage Interest Rates in 2017
We’ve all heard by now the Federal Reserve raised interest rates 1/4% in December 2016 due to a reflection of the confidence in the economy. This was just the second increase in 10 years. Fed officials now expect to raise rates in 2017 another 3/4% due to a strong economic outlook as stated recently in the Wall Street Journal (WSJ). So how will the increase effect mortgage interest rates? Homeowners with variable rate loans such as a home equity line of credit are feeling this increase now. Realtor.com is saying we have a window of time between now and early 2017 before rates move dramatically. Rates are expected to hit 4.5% to 5% by the end of 2017. “The era of ultra-low interest rates is over,” said Lawrence Yun, chief economist of the National Association of Realtors.
Remember, not every mortgage lender offers the same interest rate so it’s important to shop around.
Buying a Home in 2017
If you’re thinking of buying a home in 2017 you want to get started early. January and February are generally the slowest months of the year because winter weather discourages many buyers. The National Association of Realtors (NAR) continues to report that housing supply is low. And Realtor.com predicts home prices are anticipated to increase 3.9% nationwide. Low Inventory and increased home prices are both very good reasons to start your home search sooner rather than later.
Most people don’t know their credit score until they start to look for a home. It can take anywhere from 1 to 3 months or longer in today’s market to find a home so take advantage of this shopping time to work on your credit. You could lower your interest rate by as much as 1/2% with a stronger credit score.
Low inventory may mean you need to consider the not so perfect home. So compile a list of “must haves” and “nice to haves”. You have a better chance of finding your best deal on those not so perfect homes. And buying a home in need of work may mean that you have fewer buyers competing with you for that home.
Selling a Home in 2017
Redfin did an analysis of more than 7 million home sales over the last 4 years and evaluated which season was best for putting your home on the market. What they found is Spring is the best time to list a home but winter was not far behind. In the Spring 18.7% of homes fetched above asking and Winter was at 17.5%. Spring sold 48% of homes within 30 days and Winter sold 46.2% of homes within 30 days. Yes, there are fewer buyers in the winter months but there are also fewer homes for sale, meaning your home has a better chance of standing out. Buyers this time of year often need to move and want to close quickly. The closing process in the Spring tends to be slower because of the increase in the number of transactions.
With the threat of rising interest rates and rising home prices, fence-sitting buyers will most likely be buying earlier in the year rather than later. My daughter, who had not planned to buy her next home for another year or so, now has started looking so she can take advantage of today’s interest rates before they rise.
Regardless of when you decide to sell your home, please keep in mind that the real estate market is impacted by a variety of factors. Conditions now may not be the same 6 months from now.
Millennials and the Housing Market
Did you know that the Millennial generation is now the largest generation in U.S. history? The Wall Street Journal recently reported the number of adults under age 30 increased by more than 5 million over the last decade. In 2015, 40% of young adults 18-24 were living with their parents or other family members. This is the highest since 1940 and continues to increase despite the rebounding economy and healthy job market. An increase in debt, rising rents, interest rates and tougher mortgage-lending practices can be obstacles for Millennials. These obstacles have created a far lower demand for housing from the Millennial generation. Further, census data shows younger Americans are getting married and having children later in life than past generations. With all of this said economists still think the millennial generation will more than double its current number of households through 2025, adding to the projected increase in home sales.
Mr. Trump goes to Washington or “The Donald” Factor
On January 20th, 2017 Donald Trump will be sworn in as the 45th President of the United States. So what impact is his presidency expected to have on the real estate industry?
Trump, the real estate the developer. We all know that Donald Trump made his name as a developer, including of apartment buildings. That’s brought hope that after years of under-construction, Trump might put in place federal policies to jolt the homebuilding industry back to life.
Inflation and interest rates. Some pundits worry that Trump’s policies could boost interest rates. And that could make buying a home more expensive. But if Trump’s promised tax cuts, reductions in regulations and big spending initiatives does lead to significantly faster growth, these positives could offset the fact that home buyers face higher interest rates. But if Trump’s policies lead to higher inflation with no corresponding economic growth, that could force the Federal Reserve to increase interest rates despite a weak economy, seriously blunting the housing recovery.
Drain the Washington DC Swamp. Another of Trump’s campaign promises—to drastically reduce federal regulations—could also give a leg up to homebuilders. During the presidential campaign, Trump cited a statistic that said 25% of the cost of a newly built home is the result of government regulations. He promised that he’d take a hatchet to these rules, arguing that he could get the regulatory cost of a new home down to 2%. Realistic or another of Trump’s outlandish campaign quips? We’ll have to wait and see.
Trump could also help the real estate industry by easing federal financial regulations. Lending standards remain stricter today than before the real estate melt down of 2007, and one theory as to why is that banks are wary that they will get sued by the government or by Fannie Mae and Freddie Mac for passing on loans that aren’t beyond reproach. “An important reason for overly-conservative lending is due to the exposure of random lawsuits by the government on lending institutions in recent years,” says Lawrence Yun, chief economist with the National Association of Realtors. “To the degree that the Trump Administration makes it very clear as to what is and what is not an infraction then more mortgages will be provided to consumers.”
The repeal of Dodd-Frank regulations, to the extent that this action enables banks to take on more leverage, will also likely boost mortgage lending.
One thing’s for sure: this country will be run by the Trump Administration for at least the next 4 years. That, combined with the current Republican controlled Congress, means that this country will likely be governed much differently than it has been in the past 8 years.
To summarize, despite many opinions from many people, there’s no way to be certain of what lies ahead in 2017 for the real estate industry. And like most things, it’s best to take from this article that information that best serves your interests. One thing that is certain, though: we all have to live somewhere – now, in 2017, and beyond.