Forecasting future trends won’t ever be completely accurate, but chief economists from Zillow and Realtor.com are likely to be top notch on their estimations of what will happen in the real estate market in 2017. Svenja Gudell from Zillow and Jonathan Smoke from Realtor.com recently weighed in on the near future possibilities. Check out their thoughts.
For those not ready to make the big leap into ownership, there is some good news: rent prices compared to income should mean rent becomes more affordable for many. Gudell said: Incomes are growing faster [than rent prices] for the first time in quite some time. That’s not to say the rent prices won’t rise, expect an overall rent price hike of about 1.5%, mainly because more rentals will be available as more people are buying homes.
Mortgage Rates Will Climb
Interest rates have remained at record lows for several years, but as the economy turns more positive, the interest rates will rise. That has already begun, and the Federal Reserve indicated they expect three more increases before year end. For those planning to buy a home this year, it will be better to do it as quickly as possible and shave off a lot of money over the term of the loan. If you can do it during the winter or early spring – even better, since homebuying usually increases during the late spring and early summer.
Home Values Increasing Still, but Slower than Last Year
According to Gudell, home values rose in 2016 on average by 4.8% and 2017 should see them grow by another 3.6%. That is actually a sign of the growing economy, home values are normalizing according to both Smoke and Gudell.
Home Buying Expected to Rise
Expect to see both Millennials and Boomers buying many of the homes. The oldest millennials are hitting their mid-30s, so marriage and children and a place to settle are becoming common for them. It doesn’t hurt that many of the new jobs being created are for those in the millennial age range, and the average wage for those jobs is expected to rise as well.
For baby boomers, a large portion of them are retired or about to retire, their children have moved out, and they are looking for homes that take less work, are not as big, or are in areas that are close to their children and grandchildren. As the housing market recovers, they can now sell their homes without taking a loss. Smoke said: “While a sizable number want to downsize to control expenses, we’re seeing others move to the biggest house they’ve ever owned because they’ve got children and grandchildren and they want those people to come visit.”
The suburbs now become hot properties since buyers get more for their dollar on the edges of the cities rather than living where land and home values remain at a premium. There’s also less available in the cities, even at higher prices.
Midwestern cities will pull millennials to them. Realtor.com thinks the top draws are likely to be Madison, Wisconsin; Omaha, Nebraska; Columbus, Ohio; Minneapolis, Minnesota, and Des Moines, Iowa. According to Smoke, “I don’t think it’s so much about millennials moving to those cities. It’s more about millennials deciding to stay and deciding that this is where they want to buy a home.”
Buying on the West Coast will become even more expensive. Those homes, especially in Northern California, Portland, and Seattle (as well as Tucson, Phoenix, and Denver) saw the fastest and soonest-to-arrive job growth at the end of the recession, so home prices started to increase in those areas ahead of the rest of the nation. As Smoke pointed out, when jobs increase, then so does population, making homes in higher demand and driving the prices up.
Is it time to buy or sell your home?