New Year and the Housing Market 2017
Experts are predicting a strong year ahead for US housing without a risk of a crash downturn. They see existing home sales up to 6.5 Million for the next year along with a whopping 160,000 new homes being built per year until 2024. When builders are feeling optimistic, it’s a good omen.
According to real estate firm Trulia, the number of available starter homes dropped by more than 10 percent. What does all this mean for the millions of Americans who are considering buying a home next year? “I think it’s fine,” CBS News business analyst Jill Schlesinger told “CBS This Morning” Wednesday. “It’s been a good year for both existing and new home sales.”
According to the National Association of Realtors/U.S. Census Bureau, existing home sales are up 5.9 percent from last year, and new homes are up 17.8 percent. But inventory is also down, which has driven up prices and made it a “little harder” to get into the housing market, Schlesinger explained. The National Association of Realtors predicts a 30-year fixed mortgage rates could climb up to about 4.6 percent by the end of 2017. But Schlesinger said that’s not a reason to freak out.
“Let’s look at sort of the average house — $250,000 house. You get a $2,000 mortgage,” Schlesinger gave an example. A month or two ago, with a 3.5 percent 40-year fixed mortgage rate, the monthly payment would have been $898. At 4.5 percent, it would be $1,013. “Now, I’m not saying everybody can pull in that extra $115 a month or so, but a lot of people can and the economy is slowly improving, and if your wages are rising enough, you should be able to still afford it,” Schlesinger said.
Here’s a short list of positive factors that will affect the housing market 2017 and beyond:
1. moderately rising mortgage rates
2. low risk of a housing crash for most cities
3. millennials and generation z buyers coming into the main home buying years
4. a trend to government deregulation
5. labor shortages pushing up costs of production
6. the economy will keep going – longest business cycle in history
7. Donald Trump and his “drain the swamp” crew
The Trump Effect
The biggest factor even for 2017 is Donald Trump. The repatriation of business back to the US may come with a big price — a high dollar and strong inflation. Trump has spoken on another matter that might seem insignificant – that of forgiving student loan debt after 15 years. Young people including Millennials can’t buy homes because of massive student loan debts that kill their credit scores and keep them unable to save for the downpayment. That’s called a syndrome.
What Trump is doing hopefully, is creating a new spirit for business, that even small businesses might stand a chance in 2017 and beyond and these are businesses that build and renovate homes, supply services, owned by people across the country who haven’t had a break in a long time (disappearing middle class). That can help make people feel confident about buying a home, or investing regardless of the price. And prices in some areas of the country are still affordable — just maybe not Miami, San Francisco, Los Angeles, Seattle or New York!
Mortgage rates are forecasted to stay low. Yet recently, mortgage rates have risen above the 4% mark and homeowners are locking in their home loans at the 30 year period. Some are calling this the Trump Effect. With Trump in power, lending requirements are expected to be eased, land opened up for development, and this should stimulate home purchases. With employment growing and wages moderating upward, the market is set for growth. Yet, some housing forecasters still cling to the idea that housing starts will moderate after strong growth to 2020.