How will the housing market change in 2017?
There are a lot of factors at play this year. How can we expect them to mold the property market? What will it mean for home buyers, sellers, and real estate investors?
5 Ways the Housing Market Could Change in 2017
1. Increasing Property Prices
Home prices are heading up in just about every market. High demand and the resulting price lift in urban living areas will drive people to the suburbs. Expect to see areas that were booming in 2005 and 2006 to come back again as buyers and renters seek more affordable places to live.
Related: 7 Real Estate Investors Discuss What They’re Seeing in Their Local Markets
Builders and investors are bullish on the market. This continues to fuel new building. This includes new home developments, condo buildings, mixed-use projects, and spec homes. This will continue to be most concentrated in dense urban areas, followed by the suburbs as land prices rise. Eventually this will lead to oversupply, and property owners may be forced to begin to offer larger incentives and cut prices.
3. Interest Rates
Additional building and spending will fuel rising interest rates. Higher interest rates can also compound issues with oversupply and high property prices. Higher mortgage rates will make it even more expensive to buy a home, as well as increase living expenses in general. The Fed Reserve has indicated at least two or three rate hikes may come this year. While this may be a symptom of a stronger economy, many investors may not be anticipating how hard this will hit their cash flow each month.
Related: A Look at Today’s Housing Stats: Are We Entering a New Bubble?
4. Mortgage Lending
The new White House administration has pledged to ease mortgage lending and access to credit. Expect this to mean more aggressive marketing from lenders and progress back toward more subprime-type loan features and lower down payment requirements. However, this may be offset by higher rates, and unless certain regulations and liabilities are cleared, banks and funds may continue to prefer lending to investors rather than regular home buyers.
5. Jobs & Wages
Much of the above is also likely to add to the momentum of jobs being added to the economy. As thousands of new jobs are added in energy, manufacturing, and finance, increased competition for talent could finally boost wages. This will partially offset high housing costs and support more growth in rents and house prices. Still, it will be critical for individuals to position themselves in careers and businesses, which will benefit from emerging technology, as many jobs are replaced by AI and other tech.