What To Expect and Hope For In Real Estate For 2017
Ilyce Glink writes that while predicting how the real estate market will behave is never an exact science, this year could be especially difficult to predict since presidential policies are tough to foresee at this early stage. Still, plenty of market trends for the new year are much clearer.
As the oldest of the millennials push into their mid-30s, many will start to settle down and buy houses. More jobs are being created for 25- to 34-year-olds than any other age group, and wages are rising.
Baby boomers, the oldest of whom are entering their late 60s, are also looking to move as they reach their retirement years. In the last several years, baby boomers’ participation in the housing market has dwindled. Many already own homes and may have been reluctant to sell until their properties recovered the value they lost in the housing bust. Another new trend, boomers are opting not to move to traditional retirement hot spots like Arizona and Florida, instead choosing to move closer to family.
Home values should increase about 3.6 percent next year. That’s a slight drop from 2016, when national home values rose about 4.8 percent. Slowdown in appreciation is an inevitable effect of the market’s recovery, and it signals that the nation’s housing market is normalizing.
Due to lack of inventory, many people have to look further out from cities to find homes in the right price range. More buyers will move to the suburbs to find affordable housing.
New construction always comes at a premium, but that will be even more true in 2017. A labor shortage in the construction industry is forcing builders to offer higher wages to compete for workers. Those costs will be passed on to buyers. President-elect Donald Trump’s promises to deport immigrants — who often find work in the construction industry — could exacerbate the existing labor shortage.
While many young people have traditionally headed for the coasts after college, an increasing number of millennials are choosing to settle down and buy homes in the Midwest. In particular, Realtor.com predicts millennials will settle in Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis, Minnesota. These markets are close to large universities, offer well-paying jobs and are generally more affordable for young homebuyers,
West Coast Real Estate
Home prices on the already-expensive West Coast will continue to rise. Population growth follows job growth, and increasing demand for homes beyond the market’s ability to build inventory leads to higher prices.
Renting will become more affordable next year. Zillow predicts rental rates will rise only about 1.5 percent in 2017. This is due in part to an increased supply: A lot more multifamily rental units are being built, and many renters have doubled up with roommates. These two things have helped supply rise to meet rental demand.
Following the housing market crash, mortgage rates remained at record lows for years. Rates are climbing now and are expected to keep doing so next year, with the Federal Reserve indicating that three more increases to its benchmark rate are coming in 2017.
Real Estate in Cities
During 2016, Zillow held a number of Housing Roadmap events to meet with officials in cities across the country and learn about the challenges and housing visions unique to each city. Space was the issue and it will be resolved by building smaller homes — which take up less space so they can build more of them — and by developing public transit so people can move away from the city center and still have access to it.