When 2016 came to a close, many were apprehensive about what the New Year would bring. Despite political upset and social uncertainty, the real estate market remained positive throughout 2016. Here are five things to expect from housing for the rest of 2017.
1. Millennials and Baby Boomers Will Shape The Market
As millennials approach their early and mid-30’s, they will soon make their presence known to the real estate market. While many millennials traditionally relocate to coastal cities after college, an increasing number of millennials are choosing to settle down and buy homes in the Midwest. In 2016, market research showed people under 35 made up 61% of first-time homebuyers. This surge of homeownership is due to more job creation than for any other previous generation, in addition to wages rising. Millennials are also at the age when they want to settle down and start a family.
Meanwhile, baby boomers are choosing to move as they approach retirement. Baby boomers’ influence in the housing market has decreased in the last several years. Many already own their own properties and are cautious to sell their properties.
In the last several years, baby boomers’ participation in the housing market has dwindled. Many already own homes and remain reluctant to sell until their properties until they recovery their property’s value lost during the market recession. Additionally, many baby boomers are choosing to forego relocating to popular retirement spots; instead, choosing to remain in close proximity to family members.
2. Many Will Look For Affordable Housing
As a result of limited space, housing development in cities will create denser housing options. Continuously growing property values means many homebuyers and renters will have to choose between prime location, space and affordability. As property costs continue to rise, more buyers will relocate to the suburbs for affordable housing.
3. Expensive New Homes
New construction always comes at a premium, but this will increase even more during 2017. A labor shortage in the construction industry forces builders to offer higher wages to compete for workers. As a result, prospective homeowners will feel the financial burden.
4. Mortgage Rates Will Rise
In the aftermath of the housing market crash, mortgage rates remained at record lows for several years. But, you can expect to see an improvement in 2017. Rates continue to climb, with the Federal Reserve indicating that three more increases to its benchmark rate are coming in 2017. Forecasters believe mortgage rates above 4 percent are here to stay. The Mortgage Bankers Association predicts that the 30-year fixed will average 4.3 percent in the first quarter. In addition, Fannie Mae forecasts an average mortgage rate of 4.2% for 2017.
5. Increased Home Values.
While many will see their home value increase, it will be at a much slower rate than the previous year. Real estate experts predict home values to increase by about 3.6% in 2017, which is a slight drop from 2016 when national home values increased by 4.8%.
6. Interest Rates Will Rise
Unfortunately, you will see increased interest rates, and they will not go down in the foreseeable future. On Dec. 14, the Federal Reserve increased interest rates by 25 basis points. Those who should act fast to take advantage of current interest rates are homeowners with an adjustable rate mortgage. Experts suggest refinancing your mortgage to secure a fixed rate and avoid increasing interest rates.
For more information about changes to the real estate market, contact the experts at Hunt Mortgage Group today.