In the new year, home price growth will hold steady and homes will sell even faster than they have this year, making 2017 the fastest real estate market on record, according to Redfin.
“Next year, the new administration will lead a shifting U.S. economy,” said Redfin chief economist Nela Richardson. “Baby boomers will become less economically relevant as millennials continue to come of home-buying age. Superstar cities will create much of the job growth, pushing wages in those cities up. Yet the percentage of homes in America’s largest cities that are affordable on the median income has declined the past two years and will continue to fall in 2017. Sales would be even stronger if there were more starter homes on the market to meet demand from millennial homebuyers. We expect to see more homes built in second-tier cities and more millennial homebuyers moving from the coasts to smaller and inland markets where they can find affordable starter homes.”
Redfin’s Seven Housing Predictions for 2017:
1. The housing market will continue to grow, but at a slower pace due to affordability pressures. The percentage of homes in America’s largest cities that are affordable on a median income has declined the past four years and will continue to fall in 2017. Even with rising affordability pressures, Redfin predicts:
• Median home sale prices will increase 5.3 percent year over year, similar to the estimated 5.5 percent this year.
• Existing homes sales are forecasted to increase 2.8 percent in 2017, compared to the estimated 3.4 percent increase in 2016.
• Inventory will recover slightly, up 1.7 percent year over year, after falling an estimated 3.4 percent in 2016.
2. 2017 will be the fastest real estate market on record. In 2016, the typical home stayed on the market just 52 days, the shortest time recorded since 2009. Redfin anticipates 2017 will be even faster because of increasing demand for short-notice home tours and the development of new technologies to make the entire real estate transaction more efficient.
3. New construction growth will slow. Given that nearly one in four construction workers is foreign-born, stricter immigration policies are likely to make the labor-shortage problem even worse, slowing new-construction growth to 6 percent in 2017 if these policy changes go into effect next year. This will most affect the availability of affordable starter homes, which means higher prices for first-time buyers.
4. Mortgage rates will increase, but not by much. Redfin expects the 30-year fixed mortgage rate to climb, but no higher than 4.3 percent in 2017. Wall Street’s optimism for economic growth and inflation in 2017 is expected to keep mortgage rates low.
5. More people will have access to home loans. Fannie and Freddie are increasing the size of loans they’ll back, while large financial institutions have introduced mortgages requiring as little as 1 percent to 3 percent down. The Trump Administration’s plans to privatize Fannie and Freddie likely won’t take effect until at least 2018.
6. Millennials will move to second-tier cities. Markets able to offer buyers new construction at affordable prices will take center stage in 2017, since many first-time homebuyers have been priced out of the starter-home market in more expensive metropolises. Redfin analysts expect cities like Raleigh, North Carolina, Austin, Texas, and North Port, Florida, which lead the country in the number of new residential building permits per 1,000 people, to lead this trend.
7. Real estate commissions will continue to fall. A 2016 Redfin study found that most people who had sold a home in the past year got a discount on the commission they paid to their broker, and so did almost half of buyers. Redfin projects that as a growing number of disruptive companies offer new, money-saving ways to buy and sell homes, even more consumers will save on real estate fees in 2017.
– Originally published by the Collingwood Group – 12/14/16
