9 Real Estate Trends to Watch in 2017

By Massoud Aaron Yashouafar

1. Rising prices will keep pushing up homeowners’ net worth

According to a report from CoreLogic, home prices are projected to rise another 5.2 percent through

September 2017. Over the past year, there has been a 6.3 percent increase. Rising prices have doubled the amount of home equity held by Americans. Last

year, the average homeowner gained more than $11,000 in home-equity.

2. But mortgage rates are going up

• Rates for conventional loans shot up nearly a quarter of a percentage point in the days following the election This was the fastest increase since the ‘taper tantrum’ of 2013. The Fed is expected to continue raising rates on a strong economy. Before Trump’s election, the Mortgage Banker Association was predicting that rates would reach 4.8 precent by the end of 2017.

• Therefore, borrowers who are looking to re-fi should do so earlier in the year. Also, buyers should consider locking in their rates during the closing process. Some worry that rising interest rates could ruin the housing market, job security ad wage growth are larger factors on home activity than interest rates.

3. It’s getting easier to get a mortgage

According to the Mortgage Credit Availability Index, it is easier to get a mortgage now than it has been the past 8 years. There is more availability of both jumbo

loans and low down-payment loans. Additionally, banks may be more willing to work with borrowers

over the next few years as they look to make up for a decline in refinancing businesses when interest rates

go up.

4. Rents will continue to level off

According to Zillow’s rent forecast, rents in mostly large metro areas will continue to increase next year, they’ll grow as just 1.7 precent next year. The modest

gains follow years of double digit growths in many places and reflect inventory finally catching up with

demand. Builders are creating new apartment buildings to accommodate the nearly 40 precent of Americans who are choosing to rent rather than buy

housing.

5. The share of cash buyers will move closer to normal

For the first time since 2007, all-cash buyers fell below30 precent of home sales this year. They’re

predicted to decline for the next two years until they get back to their historical average of about 25

percent. This is good news for some homebuyers who have struggled in recent years to compete with all-

cash buyers in bidding wars.

6. New homes are getting smaller

• For the first time since the recession, the median square footage for new homes fell this year. Smaller homes are the result of several trends controlling the real estate market, including higher demand for homes close to city centers where space is tight, and continued growth in the “tiny home” movement.

• The change in homes reflects a renewed focus by builders on the neglected market of entry-level buyers. “They’re building smaller homes because people can’t afford to buy the larger homes anymore,” Chief Economist at Texas A&M’s Real Estate Center.

7. Inventory will remain tight

Although builders have increased production, they’re only putting up homes at about 60 percent of the

normal pace. The total housing inventory at the end of September increase 1.5 precent to 2.04 million

existing homes for sale, but that’s still 7 percent lower than last year. Unsold inventory in September was at a 4.5 percent-month supply, down from 4.6 percent

the previous month.

8. Foreign buyers will play a smaller role

Foreign buyers, who have helped fuel the luxury real estate market in recent years, backed off a bit this

year due amid rising prices and an appreciated dollar and increased scrutiny from the Treasury Department. This trend might increase as foreign investors weigh the impact of a Trump presidency on their purchase.

9. It’s getting easier for first-time buyers

After many years of the market shutting out first time buyers, it has now become slightly more welcoming.

“On the supply side, builders are finding business models to provide the level of product, such as

townhouses, that first-time buyers are looking for. And on the demand side, wage gains and the

demographics of today’s millennials who are marrying and having kids later, will help,” says Robert Dietz,

chief economist with the National Association of Home Builders.