November’s election results have thrown a once predictable 2017 slightly off kilter, and made forecasting the market a little trickier. However, the biggest headlines of 2016 will undoubtedly continue to influence the real estate market. The general consensus is that home buying should remain strong in 2017 and that we will continue to see a definite seller’s market.
In 2016, home prices appreciated beyond expectations, with national prices increasing above the previous 2006 peak. While sales are slowing slightly, homebuyer demand is increasing and unemployment rates remain low. For those reasons, experts predict prices will continue to climb in 2017 but at a slower pace.
Rates approached record lows in 2016, but in the end crept above 4% for the first time in two years. However, rates continue to remain historically low. How rates will change under President Trump is unclear. Before the election most financial experts predicted a Hillary Clinton win that would carry on the policies of the Obama administration and result in a slight interest rate increase in December. That didn’t happen. A few scenarios could play out. If the Trump administration cuts government spending dramatically, it could spike fears of a recession and contribute to another year of low interest rates. However, if President Trump’s economic growth plans instead cause inflation, the accelerated economic growth could cause interest rates to begin rising faster.
Declining housing supply was a defining issue in 2016. In markets like Akron and Canton, declining inventory created a sellers’ market with price appreciation and lightning-speed selling timelines. In 2017, we should see an increase in supply thanks to new home construction. Existing homes will likely remain in short supply, though, because of a phenomenon called “rate lock”—homeowners who locked in at a mortgage rate below 4% are unlikely to want to upgrade to a larger home at a higher interest rate.
Last year showed that Millennials are finally ready to enter the housing market. More Millennials are expected to buy a first home in 2017, according to the National Association of Realtors. And as it turns out, many of those buyers were holding off because they were saving up towards a down payment. That means those first-time buyers aren’t necessarily interested in starter homes but the move-up property.
We’ve been trying to understand the buying habits of the Millennial generation for years now, but it’s time to turn our attention to Generation Z. They’re teenagers now, but the first of the Gen Zers will turn 18 in 2017, so they’re on the cusp of entering the housing market. These buyers are coming of age with low interest rates, decent job prospects and rising wages, which means they’re going to be a lot different than the generation that came before them. All signs say this is a generation that values homeownership, with a majority of these teens stating they want to own a home.
We’re all familiar with the ubiquitous mixed-use developments that allow residents to live, work and play in the same neighborhood. This year, you’ll hear them rebranded as “surban” developments. With an attractive blend of urban and suburban living, this lifestyle is growing in popularity. Essentially, existing suburban neighborhoods are adding urban amenities to provide that live-work-play environment outside the city’s core. Those who choose to live in these dense communities of townhouses, apartments and single-family homes can often walk to work as well as walk to the grocery store, parks and entertainment venues, all while taking advantage of strong public schools.
Here’s a development you may not have anticipated: the rise of drones. Some real estate trendsetters have used drones in the past to capture aerial views of properties, but their use is expected to increase dramatically now that the Federal Aviation Administration has approved commercial use of these unmanned aerial vehicles. Real estate agents can use these flying cameras to show off properties with more than an acre of land or those with a unique landscaping feature.
Of course, only time will tell, but the general consensus is that home buying should remain strong in 2017.
Article courtesy of Tammy Grogan and Associates – Cutler Real Estate. For more information, contact them at 330-491-4126 or consult their website at www.tammygrogan.com.
Outlook 2017 Real Estate Market